Sat | Jun 6, 2020

Lipton Matthews | Freeness mentality will destroy Ja

Published:Thursday | February 20, 2020 | 12:14 AMLipton Matthews/Guest Columnist

In a market economy, prices act as a signalling mechanism directing the allocation and distribution of resources. Despite the utility of price signals in making markets competitive, politicians often advocate price controls under the guise of protecting consumers. However, price controls do not maximise consumer welfare. When controls are instituted, they result in shortages and force entrepreneurs to provide low-quality services. Capping prices is a disincentive to starting further ventures, because the existence of a price control also serves as a cap on possible profits. Therefore, no rational individual will pursue expansionary projects when he knows that potential earnings will be fixed. For example, studies have shown that rent controls reduce the incentive to build (Sims, 2007). Politicians lobbying for price controls are essentially harming the poor people they profess to love. Advocates of price controls aver that Jamaicans cannot afford an increase in transportation rates. Such a proposition is quite fallacious.

Taxi men have been enduring price controls for seven years, even though their expenses keep rising. When restaurants raise their prices due to rising inputs, most people acknowledge that this is the nature of business. They do not protest the wrongness of the action on the basis that their wages are not rising. Criticisms of that nature is counterproductive, because maintaining lower prices when inputs rise necessitates closure, and this prevents consumers from dining at restaurants. Further, employees in the public and private sectors are usually entitled to fringe benefits and bonuses. Taxi men, however, lack such privileges.

Ordinary Jamaicans are illogical if they expect taxi men to comply with a predatory pricing regime. Polite taxi men enhance the travelling experience, but the real objective of a taking a cab is to be transported to your destination in a safe manner. The personality of the taxi man is irrelevant and if one prefers genial drivers, then one should have no association with aggressive taxi men. Eliminating controls in the transportation sector may improve the safety of passengers, since this provides entrepreneurs with an incentive to start formal taxi companies espousing professional guidelines. Passengers could then lodge complaints against rogue taxi men. Although abolishing price controls is logical, criticisms of fare increases are not unsurprising.

HOSTILE TO WEALTH CREATION

These objections are consistent with the Jamaican mentality of wanting services free or underpriced. In this regard, several Jamaicans are not different from squatters. Anyone squatting on a property, but take no action to become the legal owner, is imprudent. Many squatters construct monstrosities, but expect to elicit public sympathy on the premise that they are indigent. Squatting is undesirable to serious people, but those who squat often evade utility bills and enjoy the luxury of consuming services at no cost. Interestingly, in legal cases, politicians often side with the rule breakers, but one cannot fault a politician for refusing to want a smaller voter base. In an attempt to appear sophisticated, politicians posit a strict egalitarian defence of poor. Their philosophical ruminations usually lead to arguments about income inequality, landlessness and culminate in their advocacy of a new panoply of rights. The irony of this is that politicians created an economic environment hostile to wealth creation, thus proliferating poor people. Therefore, to ameliorate the problem of poverty, they enrich the poor with handouts and justify the provision of new rights. For example, some opine that there are rights to housing and accessing the beach. Arguing that these rights exist is really risible. Property rights prevent external powers from unlawfully interfering with our assets.

Because we have a right to property, we are able to purchase homes freely; hence owning a house is a benefit of a property right. A right to housing imposes a cost on the state or another person to provide people with houses. We do not possess the right to incur expenses for other people. If the state grants free housing, taxpayers are obviously absorbing the cost. Also, cellular phones, like houses, are important to most people. So, logically one cannot have a right to housing, but not to cellular phones. A right to housing infers that all benefits of having a right to property are also rights.

The reality is that free lunches are not real. Jamaicans need to evolve by developing a wealth-generating mindset. We have been trying the politics of redistribution and it has failed.

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