Marijuana Control - Capitalism v. Communism

It is now official. Californians would have the opportunity to decriminalize marijuana this November by voting for Proposition 19. I am glad for the opportunity. Why? Well, let me count the ways...

We Americans have a prohibition against marijuana aka weed aka ganja. People believe that it is such a harmful substance that mere controls over it (such as minimum age for use) is not enough. It must be permanently banished from our society. Well, try as we might, it has not disappeared. Despite Billions spent on catching the buyers, sellers, smokers and growers and throwing them in jail, we have not made a dent in the popularity or use of weed. Us taxpayers pay for the jails as well.

In one of my entries, I talked about the underpinnings of capitalism - prices and how they act as signals in the overall system. Do you know why Columbus sailed to the New World? He was trying to get to India where the spices were insanely cheap compared to Europe (think 10,000 times cheaper). Now let us see how different societies handle a scarce resource. Of course, in a capitalist system, the price keeps going up till demand drops to the supply available. Under commandist systems, rationing is often used. If there are 1,000 people in a town and the town has only 1,000 gallons of gasoline, allow everyone to purchase only 1 gallon. Sounds fair but is it?

What would happen is that officially the price of gasoline would remain the same but, informally, the price would skyrocket. People who love to race their hotrods would secretively buy the gasoline from the homebodies. Meanwhile, because the price has not increased in the official market, there is no incentive for anyone to create an alternative to gasoline!

So, what is it we should be doing? Well, for one, we should be looking at our experiences with another prohibition - the one against alcohol - that we had between 1920 and 1933. Thanks to the illegalization, retail value of alcohol shot through the roof and a bunch of gangsters became filthy rich overnight. They not only smuggled whiskey from Canada, they also corrupted our society - paying off police, custom agents, tax officials, district attorneys, judges and any other official they came in contact with - and infected our institutions in ways that took years to recover from. How could they get away with bribing such people? Well, the cost of making alcohol and its retail value were so very disparate that the profits were through the roof. It was easy to bribe people with 100 or 1000 times their salary.

But did the alcohol consumption go down? Well, not really. The rich had their loopholes and sources. The poor had moonshine. The middle class bore the brunt of shootouts. Who won? The gangsters!

We have a similar situation with marijuana. There are drug cartels murdering each other and innocent bystanders and killing police officers just to make sure that they control the drug business. The biggest chink in their armor is legalization - exactly what Prop 19 is going to do.

So, PLEASE go and vote and vote for Prop 19. This is a rare opportunity to right a stupid mistake made more than 2 generations back that we all are paying for ever since.


What is Capitalism

The newspapers and magazines are full of dreadful news about the economy. Budget crises are causing pain in many parts of the world. Many people are out of work and they are confused and angry about how this mess came about. Some have even gone ahead and declared the current financial crisis as the first step towards the death of capitalism.

So, what is Capitalism? Well, sometimes it is easier to describe something in terms of what it is not. So, let me tell you about the opposite of Capitalism - Commandism.

Commandism says that the people at the top know best. They should be the ones deciding for everyone what should be produced, how to produce it and in what quantities to consume it. How many acres to devote to corn production, what kinds of grapes to grow, how much should be eaten fresh, how many phones, colors of cloth etc. This philosophy underpinned the command-driven economy of Soviet Union, China under Mao and India under the Nehru-Gandhi family. So, what is so wrong about Commandism? Well, for one, there is no one so smart, so prescient, that all these decisions would be flawless. That is not so bad. The worse part is - how would the person on the top know which decision turned out to be a blunder and needs to be fixed? How do the people make sure that the decision making improves over time?

That is where Capitalism has a unique and distinct advantage. Capitalism isn't so much about private property and class tensions and exploitation of labor and resources as it is about pricing. Pricing is the ultimate survey, the ultimate opinion poll, the ultimate discriminator. Capitalism works because people can and do vote with their wallet. If the price of wheat goes up, people would be motivated to change their diets to eat less wheat. Goods tend to flow from low-price areas to high-price areas. Prices, in essence, become signals.

If eggs become popular, their price will go up. This, in turn, would cause certain motivated people to get into the egg business and thus increase the supply (forcing the price down). Others might be motivated invent materials that would help in the egg business, such as egg cartons. Yet others might be interested in promoting other sources of protein which may reduce the demand for eggs. As you can see, none of these actions required any input from the top. There is no "egg czar" to ensure the supply of eggs.

Of course, this also exposes the limits of capitalism. When setting a price, a vendor only looks at costs to itself - not the entire society. For example, if a coal mine is immune from health costs, it can simply ignore that cost. A mine that reduces health risks gets no financial benefit. Similarly, a fishing company doesn't need to fish sustainably if there is no financial benefit to do so. Benefits that cannot be expressed in financial transactions also get the short end of the stick. If the potential financial benefit of an endeavor is too low, or the risk is too large, it too would end up on the bottom of the pile.

The take-home lesson is that while capitalism does have its benefits (and there are many), it also has its limitations. Thinking that capitalism can somehow solve all our problems is a pipe-dream. But thinking that capitalism can somehow die is downright insane. It implies that all human ingenuity and drive and creativity has come to an end. If that is so, it would be best if we cease to exist.


The 3-cent solution

I love listening to NPR (National Public Radio) while driving. Actually, I love listening to NPR no matter where I am. I like "All Things Considered", "Fresh Air", "Car Talk" and many other programs. I think it is the finest station on the dial.

On the other hand, the fundraiser programming drives me up the wall. I hate, hate, hate it. I don't know if the local NPR stations (mine is KQED) have hit on an insidious formula to drive people to donate but it grates me to no end. Every time their pledge drive starts, I hope and pray that it would be over quickly. But of course, it takes far too long. I try to skip to some generic music station but then I manage to miss KQED's programming as well. So, I asked myself - Can the NPR stations raise funds without this fundraising mess?

Well, two things happened. First, I heard on NPR that more than 90% of NPR listeners did not give any money. The second was a really unlikely source - an article on the economics of iPhone applications. By building a simple application that sells for say $1 or $5, the developer is able to get a larger audience and thus is able to make far more total revenue than if the application was priced at say $100.

So, here is what I came up with. One of the reasons that an overwhelming majority of NPR listeners do not contribute is because they can't (or won't) fork over $100 or $350 that the stations keep talking about. And that is the wrong price point to advocate. My idea is very simple - simply send $10 as a "Happy Birthday" gift to your local NPR station on your own birthday. Don't wait for those grating fundraising appeals. Don't wait for any letters. Just write out a check for $10 and mail it in. This works out to 3 cents a day! Get everyone you know to do it. Hopefully we can all listen to NPR uninterrupted by these fundraising appeals...


Happy Birthday Harvey Milk

Today Harvey Milk would have turned 80. That is, if he hadn't been assassinated way back in 1978. Last year, California finally managed to create a Harvey Milk Day, the first of which is today.

I first heard of Harvey Milk in late 80s at my alma mater (University of Iowa). Many of my friends thought of him as an inspiration to do good. But I didn't realize just how positive a man he was till many years later when I read more about him and understood just how viciously gay people were persecuted in United States. He managed to convince a very large group of gay people to out themselves to fight the Briggs Initiative, at a time when hardly anyone did so voluntarily.

I wonder what would have happened if Milk had been around when the AIDS epidemic started. Would he have spearheaded a push to legalize gay marriage? Would he have managed to convince the American public that gays are not a threat to society - rather their persecution and discrimination against them is...

But these are just philosophical questions today.

Happy Birthday Mr. Milk!


Postcard from Europe #4: Where did the Wall go?

Another of my posts about the time I was running all over Europe on weekends...

But first, the background. It was a fall day in 1989 in Iowa City, home to my alma mater, The University of Iowa. I hadn't had time to read any news in about a week so after dinner, I went to the TV Room to see what was happening. I remember switching on the TV and Garrick Utley's face appeared, saying "... believe it or not, ... the Berlin Wall is coming down."

What? Surely this must be a joke! Berlin Wall was right up there with the Great Wall of China and Eiffel Tower! One does not go about in daily life knocking down one of the global constants!

Anyways, a few years later I was working in Frankfurt and one weekend I decided to go to Schwerin, the capital of Mecklenburg-Vorpommern, the state that encompasses the entire northern tier of the ex-East Germany. It is a picturesque city surrounded by a state that feels like Minnesota - lots of lakes, rivers, stiff wind blowing from the north and very sparsely populated.

When I got there, I found that the people of Schwerin were busy trying to undo 40+ years of neglect under Communist rule. They were busy fixing roads, sidewalks, train stations and the like. If you did not keep an eye firmly fixed to the ground, there was a good chance you would run into a protective barrier (this is Germany after all).

That evening I had an even bigger surprise in store. At the youth hostel, I met a couple from ex-East Germany. We ended up playing Trivial Pursuit - German language edition. One of the questions was "In Berlin, U1 [subway] line runs between which two stations?"*

You would expect that this question would be straightforward to answer. However, this question took the most time during the entire evening! First the guy wanted to know when the game was printed. That is when I came to know that U1 line existed before the division of Berlin and each side had their own version of U1 line and a unification of the Berlin subway system was underway. There was quite a bit of arguing around which stations were on U1. Here was a couple who had lived in Berlin as students and had used the subway system to go everywhere and they got really busy recounting all the stations they had used and which ones had tricky exits and they recounted the stores that they had patronized that no longer existed.

That is when I realized how completely the Wall had fallen. In a little over 3 years, this young couple had started to forget their own daily lives to the point that they were forgetting the brands of various daily staples!

Many years later, I saw Good Bye Lenin! As I laughed with the movie, I deeply wished that I had that couple sitting next to me. They would have laughed with me but I feel that they would have had a good cry too...

* I am writing this from memories almost 2 decades old. I am quite confident that there are some errors in my memories...