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The state sets the "lowest reported lawful retail price'' for milk; the law says milk cannot be sold below what the state decides. Or else. Just like the old USSR price fixing boards

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Got Milk?

The state sets the “lowest reported lawful retail price” for milk; the law says milk cannot be sold below what the state decides. Or else. Just like the old USSR price fixing boards

So what’s the price of milk got to do with The Adventures of Jonathan Gullible: A Free Market Odyssey?

On Sunday, July 1st, 2007, the California Department of Food and Agriculture raised the minimum retail price for a gallon of low-fat milk to $3.10, compared to $2.10 in January, up 48%. The state sets the "lowest reported lawful retail price” for milk; the law says milk cannot be sold below what the state decides. Or else. Just like the old USSR price fixing boards.

The state government reports this is really good for farmers. They forgot to say it is really bad for consumers. In fact, Kelly Krug, director of the “Division of Marketing” of the CDFA was saddened that they were forced to do it: "If it were a totally free market, the trading of these commodities could translate into the (figure) that farmers get,” said Krug.

Huh?

In a totally free market a gallon of milk would probably be selling for under $1.00.

It’s clear that Mr. Krug never learned how the free marketplace works when he was growing up. But it’s not surprising.

Economics can be confusing. Especially if you are in high school. Even more so if you are in college.

Most kids start out living —  in economists’ terms — the fine socialist life. They don’t have to cook or feed themselves. They don’t have to buy their own clothes. Many even get a free weekly allowance — just for being alive. Sometimes their parents open a bank savings account for them. They have their own cell phones, I-Pods, computers and digital cameras -all usually bought for them by their parents. And when they become teenagers, they often are given their own credit cards (guaranteed, of course, by their parents).

The lucky few get part-time jobs as weekend shop clerks or doing paper deliveries, but many teenagers never experience the opportunity to work for a living until they finally graduate from college many years later.

It’s then that the rubber hits the road. Having been raised to be on the dole (though, by then, having become expert consumers) they are woefully unprepared to deal with the real world of economics, only willing to pay them for their talents in a competitive job marketplace.

So it comes as a shock that socialist ideas don’t count for much in a free-market world (unless they get a government job ). Concepts like accountability for one’s actions, supply and demand, cost versus price, and time versus money are often unknown. And the even stranger notion that you have to give something first before you can take something back is hard to fathom. The old Soviet joke: “they pretend to pay us and we pretend to work”, while tellingly funny is, in fact, backwards in describing how the marketplace really works. The free market rewards those the highest who can provide the most value.

When they get their first pay check the reality settles in. It’s then that they see how much money is taken out, bit by bit, from their gross income for their take home pay. Items like social security, Medicare, health insurance, unemployment insurance, workman’s comp, federal income tax, state income tax and (sometimes) city income tax become instantly – painfully — obvious on their pay check stub. Most of these costs are, of course, forced subsidies which take the money out of their pockets to transfer it to the benefit of others. Hidden expenses like the employer’s matching payments to social security, Medicare & the insurance programs don’t even enter their mind.

Wouldn’t it be nice if someone would just write a book, in a humorous sort of way, which could gently teach them the basic economic principles that make the world work while they are still, say, in grade school or high school?

Fortunately my friend Ken Schoolland has written such a book. It’s been translated into over 40 foreign languages, read by hundreds of thousands of kids in dozens of countries, and can be downloaded as an English-language edition, complete with commentary for the college-level student. It’s called The Adventures of Jonathan Gullible, and is available for free at www.JonathanGullible.com.

Jonathan, is an adventuresome soul who gets lost one day in a great storm while sailing near his seaside town. He winds up crashing into a shallow reef of a mysterious island which, he later discovers, the locals call “Currumpo”.

Along the way, he meets the people in their various villages and discovers, with great innocence, a world turned upside down. One day while wondering into one particular town, he sees a dignified, well-dressed man kneeling in the street, trying painfully to walk. Jonathan offers him a hand. “No thank you, said the man wincing in pain. I can walk OK. Using knees takes some time getting used to. It’s a minor adjustment to the tax code. The Council of Lords decided that tall people have too many advantages. We’re taxed in direct proportion to our height.” Jonathan was dumbstruck: “you’ll walk on your knees for a tax break?” “Sure, replied the man in a pained voice. Our whole lives are shaped to fit the tax code. There are some who have even started to crawl!”

Jonathan’s adventures carry him to a corrupt printer at “the Official Bureau of Money Creation” where he learns about the profits of official counterfeiting and he meets a young farmer woman whose farm was taken away by the Farm Police for producing too much food. He talks with a fisherman who can no longer fish in his favorite lake, ruined by pollution. When Jonathan asks: “why do others take your fish and dump trash in the lake, the fisherman responds, oh no, this isn’t my lake. It belongs to everyone — just like the forests and the streams. It’s run by the Council of Lords. They appoint a manager and pay him from my taxes. The fish manager is supposed to watch out for too much fish and dumping. Funny thing is, friends of the Lords get to fish and dump as they please”.

Jonathan later flees just in time from “The Democracy Gang”, a group of thugs who “surround anyone they find and they vote on what to do with them.” He’s told: “they take their money, lock ‘em in a cage, or force ‘em to join their gang. When the gang first attacked people, the police hauled them into court for their crimes. The gang argued that they were following majority rule, same as the law. Votes decide everything – legality, morality, everything! The judges ruled three to two in their favor: ‘Divine Right of Majorities’ they called it.”

And so it goes until Jonathan can make his escape back to reality.

In 39 short chapters Professor Schoolland (who teaches economics and political science at Hawaii Pacific University) gently carries the reader through all the major principles of a free market-based society by pointing out the absurdities of a corrupt socialist system. It seems to work.

Although written for the high school student, it’s not too advanced for a government bureaucrat to read. Mr. Krug, you can still download a copy for yourself – before the price of milk gets fixed at $4 a gallon in California.

Written By

Mr. Easton teaches University economics and is passionate about technology and entrepreneurship. He is rosy about the long-term future: ‚??The glass isn‚??t half full, it‚??s overflowing!‚?Ě

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