Seeking Osama bin Laden

In just under 6 months, we are going to mark the 10-year anniversary of a pretty big terrorist attack on USA - known by its numeric moniker - 9/11. Because everyone would be writing about it, this post is trying to beat the crowds.

Back in 2001, most Americans got mad at the terrorists and their brethren. We demanded that their lair be attacked and the terrorists be annihilated. So, we launched a "War on Terror". Our first mission was to find Osama bin Laden, a one-time "friend" of America who had gone renegade and was the mastermind behind 9/11. Somehow this "War on Terror" morphed into "Seek WMD in Iraq" to "Topple Saddam Hussein because he cast an evil eye on W's dad" to "Bring democracy to Iraq by appointing a charlatan as PM" to "We cannot leave now - the helipad on the Embassy's roof is not yet finished".

Meanwhile Osama is busy hiding in some cave. Almost 10 years later we have no clue where he is. Not only he is not in the news, he has been forgotten in the land that he terrorized 10 years back. Today, we are terrorized by bankers and the whole credit crisis (was it brought on by the "Shop till you drop" method of providing support for our troops?).

So, dear readers, if you have a clue where we can find Osama, please send a letter to:

Manager, United States of America

1600 Pennsylvania Ave

Washington DC

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.