Perspective: Chip Cartel: An Update


In the February 1987 issue of The Freeman, Michael Becker reported on the agreement between the United States and Japan to fix minimum prices for computer memory chips, assign market quotas for these chips, and guarantee that the Japanese would not undercut the agreement with sales in third countries. He predicted that “consumers will likely pay hundreds of millions of dollars more for home. computers, videocassette recorders, microwave ovens, and other products which use computer chips.”

Little more than a year later, on March 12, 1988, The New York Times reported:

“Prices for memory chips have doubled or tripled in recent months as customers clamor for supplies. Soaring prices and limited supplies of vital components have prompted manufacturers of computers and other electronic equipment to raise their own prices, slow their assembly lines and delay introducing products that require large amounts of memory. Profits are likely to suffer and some layoffs may follow.

“Although the shortage reflects several forces within the electronics industry, the one receiving the most attention is the agreement signed by the Governments of the United States and Japan in the summer of 1986.”

Funny Money

“Last month, the newspaper Sovetskaya Kultura published a letter from a dispirited Odessa film director complaining about all the privileges available to foreign tourists and to Russians who use foreign currencies or coupons.

“Reporting that ordinary Soviet citizens were refused service at many places along the Black Sea coast because they lacked foreign money, he recalled a brief conversation with a Russian child from the area. ‘Vovochka, what do you want to be when you grow up?’ he asked. ‘A foreigner,’ she replied.”

—from The New York Times,

July 22, 1987.

Training Wheels

In the late 1970s, the National Highway Traffic Safety Commission, a federal regulatory agency, became alarmed by the high accident rate of motorcyclists. At great expense, NHTSC ordered the construction of a radically new motorcycle, which would steer with the rear wheel, not the front. The prototype was found to be much safer, far more stable, at all speeds over 30 m.p.h. However, at all speeds less than 30 m.p.h., the prototype fell over, crushing the rider’s leg. The Commission was undaunted: it added two training wheels to the machine. Thus it succeeded in producing the world’s safest motorcycle, while at the same time proving beyond doubt that the safest motorcycle is an automobile.

—John Adams Wettergreen

of San Jose State University,

speaking before The Heritage Foundation,

February 11, 1988

Medicare in Australia

State hospitals require a large share of the taxpayer’s dollar. The government has many ways of controlling hospital expenditures, but the most effective is simply by closing them under the guise of “rationalization.” In hospitals that still are functioning, wards are closed and many beds are empty, despite ever-longer waiting lists. While the government makes excuses that the wards need repainting or refurbishing, the truth is that there are not enough nurses willing to accept current salaries and working conditions.

Not content with controlling just the state-owned hospitals, the Socialists now are trying to control the private hospitals. Private patients’ Medicare reimbursements have been reduced for procedures done in private hospitals, while their contributions to private hospital insurance funds have soared because of the diminishing pool of contributors. Physicians who own private hospitals are accused of profiteer-ing, and patients are warned away. Small private hospitals face closure when they fail to meet standards set by a government-supported committee—standards that state hospitals are not required to meet.

Meanwhile, state hospitals are so besieged with people wanting free treatment that their waiting lists have become a public scandal.

—Peter C. Arnold, M.D., writing in the

February 1988 issue of Private Practice

An Army of Principles

“An army of principles will penetrate where an army of soldiers cannot. Neither the Channel nor the Rhine will arrest its progress. It will march on the horizon of the world and it will conquer.” This is the inscription on one side of Rose Wilder Lane’s tombstone in a Mansfield, Missouri cemetery.

—Carl Watner, Editor

The Voluntarist


“Freedom Footnote,” by Paul Rux, which appeared in the April 1988 Freeman, contained a quotation from School Finance: The Economics and Politics of Public Education, by Walter I. Garms, James W. Guthrie, and Lawrence C. Pierce. The article should have mentioned that the original source of the quotation is James M. Buchanan, “Economics and Its Scientific Neighbors,” in Sherman Roy Krupp, ed., The Structure of Economic Science: Essays on Methodology. We apologize for this oversight.


Reader’s Digest Reprints “David”

“David: From Beggar to Entrepreneur—In a Day” by Brace Alan Johnson was reprinted in the June 1988 Reader’s Digest. This article originally appeared in the November 1987 issue of The Freeman.

We have extra copies of the Digest version of Mr. Johnson’s article. Please write to FEE, stating the quantity you’d like.


July 1988

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December 2014

Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
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