Coyote Blog

Have you ever heard of government authorities making public statements around Valentine's Day to please conserve on roses since we are entering our peak demand season for them and rolling shortages could ensue?  No?  Never?  Well, the demand spike for roses on Valentines is much more dramatic than the demand spike for power on a hot summer day.  So why no urgent government messages for conservation of the former but constant ones for the latter?

Because the rose market is not heavily regulated.  Producers are free to manage their capacity without government interference, and, perhaps more importantly, producers are free to charge peak pricing in high demand periods.  In fact, prices for roses on Valentines go for a multiple of everyday pricing that a similar differential in a peak supply period at, say, a gas station would likely get the proprietor arrested for price gouging.  But we recognize that its tough to manage a business to supply all its capacity in one day of the year, and accept the higher pricing.  Why is it we can't accept the same facts of life in electrical generation, where capacity is orders of magnitude more expensive to manage than rose growing?

More from Llewellyn Rockwell at the Mises Blog and Lynn Kiesling at the Knowledge Problem

Last week, I posted on why Wal-Mart may be calling for higher minimum wages, and hypothesized that it may be because it won't hurt them (since they already pay well higher than the minimum) and may hurt competitors.  Llewellyn Rockwell of the Mises Institute, one of the few people in America with three sets of double-L's in his name, expands on this hypothesis:

The current minimum is $5.15. According to studies, Wal-Mart pays between
$8.23 and $9.68 as its national average. That means that the minimum wage could
be raised 50% and still not impose higher costs on the company....

So who would it affect if not Wal-Mart? All of its main competitors. And the
truth is that there are millions of businesses that compete with it every day.
Many local stores have attempted to copy Wal-Mart's price-competitive model, but
face lower costs and can actually thrive....

Even similar stores such as K-Mart can pay lower wages, and that can make the
margin of difference. K-Mart pays over a much wider range, as low as $6.75 an
hour. A major competitor is mainstream grocery stores, where workers do indeed
start at minimum wage. Target too pays starting employees less than Wal-Mart, if
the Target Union can be
believed.

Now, if Wal-Mart can successfully lobby the government to abolish lower-wage
firms, it has taken a huge step toward running out its competition. The effect
of requiring other firms to pay wages just as high as theirs is the same as if
the company lobbied to force other companies to purchase only in high
quantities, to open large stores only, or to stay open 24 hours. By making
others do what Wal-Mart does, the company manages to put the squeeze on anyone
who would dare vie for its customer base.

Now here is the great irony. The left has long been in a total frenzy about
how Wal-Mart saunters into small towns and outcompetes long-established local
retailers. Wal-Mart's opponents have whipped themselves into a frenzy about the
company's success, claiming that it always comes at a huge social cost.

Now, most of this rhetoric is overblown and ignorant. Wal-Mart would not have
made any profits or grown as it has without having convinced the consuming
public to purchase from the store. Consumers could put the company out of
business tomorrow, just by failing to show up to buy.

The left's claims of unfair practices would be valid if Wal-Mart did indeed
work to impose legal disabilities on its competitors "” in effect making it
illegal to outcompete the company. And yet that is precisely what raising the
minimum wage would do: impose a legal disability on those companies engaged in
lower-wage competition with Wal-Mart. So the economically ignorant left
advocates raising the minimum wage.