Why Salon.com is Wrong About ReservationHop

             

                It seems like the writers over at Salon.com are desperate for something to whine and complain about. This article, entitled the 1 Percent’s Loathsome Libertarian Scheme: Why We Despise the New Scalping Economy, takes issue with a new application called ReservationHop which makes reservations at restaurants and then auctions them off to the highest bidder. According to the author of the article, Andrew Leonard, this application discriminates against poor people and creates “market-based class stratification”. Although I fail to see how ReservationHop is uniquely libertarian, (as suggested in the article title) I believe it provides a useful service that will generally make booking reservations more efficient. Not only is this application a useful tool in that respect, but a portion of the revenue being made is given to the restaurants themselves. There’s really nothing at all for Salon.com to complain about. Regardless, they found a way to demonize the creators of this application. therefore, I feel like I should defend them.

Leonard writes,

“I am pretty sure I don’t want to live in a society where every possible interaction with my fellow human being is up for auction at the right price point.”

            Nor will you. This is just a slippery slope fallacy. Applications such as ReservationHop are fulfilling an obvious need by selling sought-after restaurant reservations to those who are willing to pay for them. It makes sense that some restaurants apply the pricing system for reservations if they are very popular. Many popular restaurants do not have available space for everyone who wishes to eat there—especially at peak hours. Since there is a greater demand for reservations than restaurants are able to supply, those who can afford to should have the option of purchasing their reservations. This is just an efficient way of allocating the few available tables to those who want them the most. This dystopian nightmare Leonard tries to portray where “every possible interaction with your fellow human beings is up for auction” is nonsense. He then writes,

“Even when they are solving a problem, there’s a whiff of parasitism. What was once clear becomes muddy. When the answer to the question of why we can’t find a reservation available at our favourite restaurant is because someone unaffiliated with the restaurant has figured out a way to profit from our demand that just feels yucky.”

            Ever notice that what a normal person would consider rational and innovative behaviour, socialists call parasitism? That’s probably why socialist utopias throughout history have been so prosperous in comparison to those wicked capitalists, right guys?

            The arguments Salon.com presents against ReservationHop come crumbling down once they are exposed to the light of scrutiny. Chances are, the reservations being auctioned off on ReservationHop are only at the most expensive, high-status restaurants—the kinds of places you have to bribe the doorman just to get into. I doubt that any sane person would bother to sell, let alone purchase fake reservations at a Denny’s, McDonalds, or Pizza Hut. It just wouldn’t make sense to auction off reservations unless the restaurant in question was near-impossible to get into otherwise. The vast majority of restaurants are not packed on a regular basis so I highly doubt that ReservationHop will have any noticeable impact on the way most people make reservations. Mr. Leonard will still be able to eat at his favourite restaurant as easily as before.

            The great thing about ReservationHop and other applications like it is that they tap into a previously unsatisfied demand. The creator of these applications clearly saw something that was inefficient with the way restaurants took reservations, so he created a service that fixed it. Not only does ReservationHop solve the problem of getting reservations at sought-after restaurants, but it generates revenue and even shares its profits with the restaurants themselves. It’s win-win scenario for everyone. If this is what liberals call “parasitism” then power to the parasites!

“What’s happening with the new scalping apps is not democratization. It’s the exact opposite—it’s market-based class stratification.”

            Horseshit. ReservationHop is no more “class stratification” than a grocery store that charges an extra nickel for plastic bags. I think it’s fair to say that if a poor person can’t afford to spend $6 for a reservation, they probably should not be eating at restaurants in the first place. When you live in a world with a scarce amount of resources, you should expect to compete with others for those resources. Reservations of course are no exception. Even if applications such as ReservationHop did not exist, we would still expect to see people competing for reservations at fancy restaurants. For instance, if you wanted to make a reservation at some place, you would have to phone them days, or even weeks in advance to ensure you get the table you want at the time you want. Even then, there was no guarantee that you would get the reservation you wanted since someone else could have made the very same reservation before you. Now, instead of wasting one’s time and energy fighting for a reservation, one can simply pay a small fee and your reservation is guaranteed. As you can see, people have competed for reservations before, ReservationHop just found a way to allocate them efficiently.

           

Leave it to the misguided and unpleasant writers over at Salon.com to find fault with something that will generally benefit people. Then again, if anything gives individuals more free choice, it is heresy in the eyes of collectivists. I think this application is a great idea and I will be interested to hear of any future developments on it.

            

Robert Nozick's Argument against Wealth Redistribution

Wealth inequality has existed to some degree in every free society known to man. In the United States of America in particular, the current disparity between the richest and the poorest is astronomical. Many people today have argued that it is unethical for some individuals to accumulate so much wealth while others have barely enough to keep themselves alive. It is the responsibility of the state, according to these welfare economists, to maximize net happiness by distributing wealth from the richest individuals to the poorest. Some have argued that these redistributions should be in the form of taxation, while others of more revolutionary persuasion advocate the appropriation of others’ holdings by force. Regardless of how it is attempted, wealth redistribution of any kind is patently immoral, according to the philosophy of Robert Nozick (1938-2002). Nozick is considered by many, including myself, to be one of the most influential libertarian thinkers. His 1974 book, Anarchy, State, and Utopia is a phenomenal text that sets the groundwork for much of modern libertarian philosophy[1]. In Chapter Seven of Anarchy, State, and Utopia, entitled Distributive Justice, Nozick makes what I believe to be the soundest argument against wealth redistribution.

According to Nozick, someone’s entitlement to a holding is justified only if it was voluntarily transferred to them. Acquiring something by trade, by purchase, by gift, or on loan is a justifiable claim to a possession, but if something is acquired by extortion or thievery, then that holding is not just and Nozick would argue that in a free society, such an injustice would need to be rectified. Nozick’s Entitlement Theory is historical. If the sequence of events leading up to someone acquiring an object is justifiable, then so is the acquisition. If, for example, a burglar stole a television and then sold it to a friend, and that friend gave me the television as a gift, I would still not be entitled to the television since it was first acquired by unjust means. Therefore, as long as a given distribution of wealth came about by just means, then that distribution, according to Nozick is also just, regardless of how unequal the distribution may be. Those who complain about wealth inequality must understand that the current distribution of wealth has come about through voluntary exchange and the laws of supply and demand acting throughout history. Even though some people are extraordinarily wealthy and some live in destitute poverty, does not entail that anybody (especially the government) can claim possession of another’s holding for the purpose of redistribution.  

A person can only be entitled to a holding if he acquired it by just means. To illustrate this point, Robert Nozick presents what has come to be known as the Wilt Chamberlain Argument[2]. Nozick asks us to imagine a society with an egalitarian distribution of wealth, which he calls D1. Now imagine that in this society, Wilt Chamberlain puts on a basketball game and charges spectators twenty-five cents each to watch him play. Assuming that one million people decide to watch him play basketball, then Chamberlain would make a quarter of a million dollars from this transaction and all the spectators would be out one quarter. Nozick calls this new distribution of wealth D2. Even though the new distribution in D2 is extremely unequal compared to D1, D2 is still morally justifiable if all the spectators voluntarily chose to pay Wilt Chamberlain the quarter. In D2, Chamberlain would be far wealthier than anyone else, but he would still be entitled to every quarter given to him. This example shows how a non-egalitarian distribution is still justifiable even if a great disparity exists between the poorest and the richest. Inequality is not immoral as long as the transactions that brought about such an inequality were themselves moral and not coerced.

100-point games played and 20, 000 women laid

Nozick argues that a society with an egalitarian distribution of wealth is not only immoral, but impossible, since such a society would have to arrest all transactions between consenting individuals. Nozick writes,

“The general point illustrated by the Wilt Chamberlain example is that no end-sate principle or distributional patterned principle of justice can be continuously realized without continuous interference with people’s lives... To maintain a pattern, one must either continually interfere to stop people from transferring resources as they wish to, or continually interfere to take from persons resources that others for some reason chose to transfer to them.”[3]

Even if a society could somehow redistribute all wealth in accordance with an egalitarian principle, the distribution would not remain equal for very long. As the Chamberlain argument demonstrates, people are always going to voluntarily engage in transactions with others. These transactions are naturally going to make some people extraordinarily wealthy, and other people, by their own undoing, extremely poor. The problem with welfare economics is that it assumes there to be some ideal state of wealth distribution that would make everyone better off. It is an end-state philosophy. Reality is not composed of end-state distributions however, but of continuous transactions in which resources exchange hands between those who are entitled to them. To propose that there is some ideal distribution of wealth is therefore absurd because it completely discounts how the current state of wealth inequality came about. In order to impose a given distribution of wealth, the state would have to use force against anyone who did not act in accordance with the ideal distribution, which would not only be in violation of individual rights, but would also entail an enormous waste of time and effort.

As we can see, there is nothing inherently wrong with wealth inequality, regardless of what socialists and welfare advocates would have you believe. In a free society, the most talented and business-savvy individuals are bound to accumulate wealth, whereas those with no particular skills will not. As long as those wealthy people have earned their money through voluntary transactions, then they are entitled to every penny of it. It would be unethical, according to Nozick, for any Robin Hood-like character to redistribute the holdings of others on the basis that a current distribution is unequal. A free society must respect the life, liberty, and property of all.

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[1] http://plato.stanford.edu/entries/nozick-political/#MinStaVerIndAna

[2] Nozick, Robert. Anarchy, State, and Utopia, pg. 161

[3] Nozick, Robert. Anarchy, State, and Utopia, pg. 163

It's Time to Abolish the LCBO

Following the end of prohibition in Canada in 1927, the government passed the Liquor Control Act. Howard Ferguson, who was then Premier of Ontario and main proponent of the act, claimed that its goal was to “allow people to exercise a God-given freedom under reasonable restrictions… and promote temperance, sobriety, personal liberty, and above all, respect for the law.” The result of the Liquor Control Act was the establishment of a Liquor Control Board of Ontario, the LCBO, which monopolized the sale of liquor in the province. Prohibition in Canada was a failure just as it had been in the United States. Widespread smuggling, bootlegging, prescription-abuse, and illicit production ensured that nobody was actually prohibited from drinking alcohol. However, when the United States ended prohibition in 1933, they privatized their industry, whereas in Canada, we opted for a more half-hearted solution. The Liquor Control Act of 1927 ensured that the ugly ghosts of prohibition are still lingering with us in the form of the LCBO. This system we are left with gives drinkers a lot to be desired; LCBO stores have poor selection, inconvenient hours, and unreasonably high prices. The current proponents of the LCBO argue that having a monopoly on liquor sales will allow the province to control alcohol abuse and prevent underage drinking. To its credit, the LCBO does a good job in that respect. Anyone who has ever shopped there knows how stringent most employees are with checking ID, and the LCBO also runs many campaigns aimed at promoting responsible drinking and healthy choices. Many people also argue that because the LCBO charges such a high mark-up on most of their products, that this discourages drinking. I believe that people who make such arguments underestimate the ability of the free market to prevent alcohol related abuse. The current system of province-enforced liquor control is antiquated, inefficient, unreasonable, and should be abolished to make way for privatization of the sale of alcohol.

To get an idea of the effects privatization would have in Ontario, we should look to Alberta. When Alberta privatized its alcohol industry back in 1993, many people argued that alcohol abuse, violence, and drunkenness would become rampant as a result. However, crime statistics indicate that violent crimes such as theft, murder, battery, and sexual assault declined sharply in Edmonton during the years following privatization. Instances of impaired driving fell nearly forty percent from 1993 to 1995.[1] A decline in violent crime can occur for a variety of factors, and I am not suggesting that the privatization of liquor sales in Alberta directly caused this drop in crime, but nobody can make the argument that privatization leads to more crime. Arguments that privatization would encourage alcohol abuse are also unsubstantiated.  From 1993 to 1997, Alberta witnessed a substantial decline in alcohol sales[2][3]. Although alcohol consumption per capita is high in Alberta, alcohol abuse is still much higher in Saskatchewan, a province which maintains a liquor monopoly similar to that of Ontario.[4]  I fail to see how the social ills attributed to alcohol are mitigated under a government monopoly. Provided they are over the age of 19, alcoholics, drunk-drivers, and those with violent tendencies can still access alcohol at the LCBO just as easily as the many responsible drinkers.

The "world's finest beer", according to the LCBO.

Arguments of public safety are not substantial enough to justify the enormous deadweight loss caused by the LCBO. Since it has no competition, the LCBO has no motivation to be efficient or price its merchandise according to supply and demand. LCBO has been known to reward suppliers by voluntarily paying them a higher wholesale price than is dictated by the market, which not only ensures retail prices are higher, but also that less revenue is being collected for the province.[5] The way LCBO justifies these astronomical price mark-ups is that they discourage people from drinking, but they also mean that the province is not maximizing their tax revenue. It would be pointing out the obvious to suggest these policies may not have been devised in sober judgement. Another inefficiency of the LCBO should be apparent to anyone who has shopped at any of the locations in the past twenty years—namely that the stores are all so well-decorated, staffed, stocked, and maintained. It may seem trivial to complain about how nice the stores look, but it demonstrates the inherent inefficiencies of having one firm supply the entire market. A monopoly has no competition and thus cannot be held to the same standards of accountability as in a market with multiple firms. If the staff at McDonalds piss you off, you can go to Burger King. If the décor at Home Depot makes you noxious, you can shop at Lowes. If a firm fails to live up to the standards of its customers, then the customers will go elsewhere, ensuring that every firm is held accountable to the needs and tastes of the market. However, LCBO faces no such competition, so why do they spend so much money to make the stores look pretty? People would still shop at the LCBO even if the stores were covered with bloodstains, broken glass, and the cashiers spat in your face as you left—simply because we have no other option.  The LCBO are profligate spenders, and everything from their lavish stores to their glossy magazine, Food & Drink, to their myriad of employees (many given $100, 000 salaries[6]) testifies to the inefficiencies of the liquor monopoly. All these resources being needlessly spent to maintain Ontario’s control on liquor sales could undoubtedly go to a better cause.

Privatization will be beneficial because it would open the sale of liquor in Ontario to market competition—providing consumers with a wider selection of alcohol, and more convenient ways of obtaining it. If alcohol is taxed and sold in stores like tobacco products, then it can still be kept out of the hands of minors, and the province can still make revenue off it. Since, the province of Alberta took in $11-billion off liquor mark-ups.[7]  Without the deadweight loss and inefficiencies incurred by the LCBO, Ontario would likely take in more revenue if liquor sales were privatized. Not only that, but the retail price of alcohol would likely decrease as it did in Alberta[8], even with government mark-ups taken into consideration. Everyone will benefit from privatization. The free-market can serve the needs of the public better than any monopoly—even one that is conceived with good intentions such as the LCBO. The ghosts of prohibition have haunted us for long enough. It’s time to abolish the Ontario liquor monopoly.

Now it's time to have a drink.

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[1] http://choiceforontario.com/uploads/ALCB_Privatization_Study.pdf, pg. 60-62

[2] http://choiceforontario.com/uploads/ALCB_Privatization_Study.pdf, pg. 65

[3] http://www.fcpp.org/files/9/70.%20Ending%20Saskatchewan's%20Prohibition-Era%20Approach%20to%20Liquor%20Stores.pdf

[4] http://www.fcpp.org/files/9/70.%20Ending%20Saskatchewan's%20Prohibition-Era%20Approach%20to%20Liquor%20Stores.pdf

[5] http://www.thestar.com/news/canada/2012/01/09/cohn_lcbos_pricing_policy_doesnt_add_up.html

[6] http://winesinniagara.com/2011/04/lcbo-sunshine-list-in-case-you-were-wondering/

[7] http://www.huffingtonpost.ca/mark-milke/alberta-privatized-liquor-stores_b_3984754.html

[8] http://oldfraser.lexi.net/publications/pps/5/s6_economics.html

Labour Unions Kill a Wal-Mart

Back in April 2005, workers at a Wal-Mart in Jonquiere, Quebec voted to join a labour union. In response, Wal-Mart closed down the store. Last week, The Supreme Court of Canada ruled that in doing so, Wal-Mart violated Quebec’s labour laws, and the employees who lost their jobs as a result of the closing are now entitled to receive financial compensation. Wal-Mart’s anti-union policies have angered many people throughout the years and the incident in Jonquiere was also featured in the documentary WALMART: The High Cost of Low Price. It seems that many people have this a priori assumption that Wal-Mart is evil and anything it does is utterly contemptible. Proponents of labour unions argue that workers cannot survive on a minimum wage and that in order to receive adequate wages, they need the representation of labour unions. The fact that Wal-Mart forbids employees to unionize, they argue, is indicative of the company’s greed and contempt for its workers.

I do not believe that Wal-Mart exploits its employees or harms poor communities. Due to their low prices, poor people can afford to buy more goods at Wal-Mart than they could at a less competitive store. Even if someone earns minimum wage, they can still afford to feed and clothe themselves thanks to the cheap supply of goods available at Wal-Mart. As a result of this cheap supply of goods, the standard of living in poor communities is greatly improved. The reason Wal-Mart can afford to keep their prices so low is because their business model is so austere and efficient—they cut corners wherever they can. Wal-Mart executives don’t ride around in gold-plated limousines; they fly coach and share hotel rooms with colleagues. The Wal-Mart headquarters isn’t a palace; it’s just a drab, normal-looking building.[1] This austerity extends to all Wal-Mart employees, which is why the company frowns upon unions and ostentatious benefits. Wal-Mart maintains its low prices because they pay their employees the wages that they do. If unionization, as in the Jonquiere case, would entail an increase in wages, then the Wal-Mart business model would no longer be viable to earn a profit. If the business model is not viable then the store must close. That’s Business 101. With these considerations in mind, one can see that Wal-Mart actually benefits poor communities—it’s labour unions that harm them.

The classic mantra from the left is that all corporations are greedy and wicked and they would pay their employees in pennies if the heroic labour unions weren’t there to stand up to them. Those who make such accusations not only betray their ignorance of basic supply and demand, but also their seething contempt for the rich. Labour unions are entirely self-serving organizations who benefit their own members at the expense of everyone else, and whose sole purpose is to siphon off wealth from one beneficiary to another. For example, if the US Airline Pilots Association bargains for a higher wage, then the cost will be passed onto the public through an increase of airplane ticket prices. Union leaders might claim that they are bargaining for wages at the expense of profits, but this is not true. Corporate profits are just not big enough. After taxes, corporate profits only amount to less than six percent of the total national income, whereas over eighty percent of total national income goes to pay for wages, salaries, and fringe benefits.[2]  Therefore, the cost of any benefits gained through union bargaining are almost always passed on to consumers. Since Wal-Mart prizes its ability to sell goods cheaply, one can see how unionization of their employees would not be in their best interest.

Unions also slow job creation. As labour unions bargain for higher wages and benefits, the cost for the business to hire new employees becomes more expensive. This means that a business will hire fewer employees and many people who are looking for work in that sector will be unable to find a job. Examples of this can be seen throughout history. In the 1920s, the United Mine Workers of America, led by John L. Lewis secured wages for its workers that were unprecedented at that time; as a result, the price of coal skyrocketed. Businesses also could no longer afford to hire coal workers, so they were gradually replaced with machines. By the early 1960s, there was massive unemployment in the coal industry and once prosperous mining towns became virtually deserted.[3] This example demonstrates the fact that unions only benefit their own members at the expense of everyone else. If unions were really looking out for the best interests of all workers, then they would dissolve themselves immediately.

Those who condemn Wal-Mart for closing their store in Jonquiere should reconsider their position. It is usually rich middle-class people who hate Wal-Mart because they see the company’s austere and frugal nature as exploitive of lower classes. However, Wal-Mart employs 1.4 million Americans[4] and 90 000 Canadians[5], contributing greatly to the workforce, and they can afford to sell goods at a discount to those who may not have been able to afford them otherwise. I see Wal-Mart as beneficial to any community because they are a cheap source of everyday goods. Why should Wal-Mart have kept that one store in Jonquiere open if unionization made their business-model unviable? Rational people are in business to make a profit, and if no profit is to be made in Jonquiere, Quebec, then businessmen will go elsewhere.

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[1] http://money.howstuffworks.com/wal-mart.htm

[2] Friedman, Milton. Free to Choose: A Personal Statement. Pg. 234

[3] Sowell, Thomas. The Thomas Sowell Reader. Pg. 72

[4] http://www.forbes.com/sites/realspin/2013/11/27/why-do-1-4-million-americans-work-at-walmart-with-many-more-trying-to/

[5] http://walmartcanada.ca/Pages/Company%20Profile/168/163/163