March 25, 2015

Millennials, philosophical malaise, and the moving target of “adulthood”

Filed under: Britain,Economics,Media — Tags: , , , — Nicholas @ 05:00

In Spiked, Tom Slater reviews a recent book by Susan Neiman, calling it “the philosophical kick up the arse my generation so desperately needs”:

Why Grow Up?, the latest book by American philosopher and essayist Susan Neiman, begins with a slyly subversive statement: ‘Being grown up is itself an ideal.’ In Britain today, this couldn’t seem further from the truth. Today, we’re told, is the worst time to be reaching adulthood. With economic strife, rising house prices, tuition fees and widespread youth unemployment weighing on Generation Y’s pasty back, coming of age merely means coming to the realisation that debt, destitution and living with mum and dad into your thirties is your inevitable inheritance. And that’s hardly an adulthood worth having.

The question this book seeks to answer is why growing up seems such a grim prospect today. From the off, Neiman dispenses with the sort of neuroscientific apologism that we’ve become accustomed to in recent years. Within the current, fatalistic climate, adulthood has been defined down. The Science now says that adolescence stretches into your mid-twenties. But, as Neiman observes in her introduction, there’s nothing scientific about growing up. The lines between childhood, adolescence and adulthood are mutable, and have changed over time. Less than a century ago, childhood, as a time of pampered play and dependence, lasted barely a few years for the vast majority of the population. And when most young people were out of school and married by the end of their teens, adolescence – the rebellious grace period between Tonka trucks and 2.4 children – didn’t even exist.

Instead, Neiman presents adulthood as a process of coming to terms with the circumstances you find yourself in and then committing to changing them – reconciling the ‘is’ and the ‘ought’. She situates this in the history of Enlightenment thought, in which the doomy realism of Hume clashed with the rugged idealism of Rousseau. ‘It would take Kant’, Neiman writes, ‘to appreciate the fact that we must take both seriously – if we are ever to arrive at an adulthood we need not merely acquiesce in but actively claim as [our] own’.

Reason.tv – Sports Stadiums Are Bad Public Investments. So Why Are Cities Still Paying for Them?

Published on 17 Mar 2015

“Anybody that drives around Southern California can tell you the infrastructure is falling apart,” says Joel Kotkin, a fellow of urban studies at Chapman University and author of the book The New Class Conflict. “And then we’re going to give money so a bunch of corporate executives can watch a football game eight times a year? It’s absurd.”

When the Inglewood City Council voted unanimously to approve a $1.8 billion stadium plan on February 24th, hundreds of football fans in attendance cheered for the prospect of a team finally returning to the Los Angeles area.

On it’s face, the deal for the city of Inglewood is unprecedented — Rams owner Stan Kroenke has agreed to finance construction of the stadium entirely with private funds. The deal makes the stadium one of the most expensive facilities ever built and is an oddity in the sports world, where most stadiums require millions in public dollars to be constructed.

And while the city still waits to hear if it will indeed inherit an NFL team, the progress on the new privately-funded Inglewood stadium has set off a bidding war between other cities that are offering up millions in public subsidies to keep (or attract) pro-sports franchises to their area.

St. Louis has proposed a billion dollar waterfront stadium financed with $400 million in tax money to keep the Rams in Missouri. And the San Diego Chargers and Oakland Raiders have unveiled a plan to turn a former landfill in Carson, California, into a $1.7 billion stadium to keep the Rams from encroaching on their turf. While full details of the plan have yet to be released, it’s been reported that the financing would be similar to the San Francisco 49er’s deal in Santa Clara, which saw the team receive $621 million in construction loans paid for with public money.

Even the fiscally conservative Scott Walker is not immune to the stadium spending craze. The Wisconsin governor wants to allocate $220 million in public bonds to keep the Milwaukee Bucks basketball franchise in the area. Walker has dubbed the financing scheme as the “Pay Their Way” plan, but professional sports teams rarely pay their fair share when it comes to stadiums and instead use public money to generate private revenue.

Pacific Standard magazine has reported that in the last 20 years, the U.S. has opened 101 new sports facilities and stadium finance experts say that almost all of them have received public funding totaling billions of dollars. Politicians generally rationalize this expense by stating that stadiums will generate economic revenue and job opportunities for the city, but Kotkin says those promises are rarely realized.

“I think this is sort of a fanciful approach towards economic development instead of building really good jobs. And except for the construction, the jobs created by stadia are generally low wage occasional work.”

“The important thing that we’ve forgotten is ‘What is the purpose of a government?'” asks Kotkin. “Cities instead of fixing their schools, fixing their roads or fixing their sewers or fixing their water are putting money into ephemera like stadia. And in the end, what’s more important?”

March 24, 2015

Tim Worstall on the economic emancipation of women

Filed under: Economics,History,Liberty — Tags: , , , — Nicholas @ 03:00

In his Forbes column last week, Tim Worstall made the point that perhaps the biggest economic story of the last century has been the economic emancipation of women:

There’s an interesting little rumpus going on over the new book by Robert Putnam on the class divide in American lifestyles. Put very simply, the middle and upper classes seem to take marriage and child rearing seriously and the poor have a more, umm, chaotic approach. Looking at the various think pieces that have been done on this book I find myself astonished by the way that the most important salient and relevant fact is simply not being mentioned. Marriage is many things but among them is that it is an economic contract. And the terms of that contract have changed: thus it’s not even remotely surprising that behaviour has changed too.


Which brings me to that headline: that the economic emancipation of women is the most important single fact of the past century. That past really was a different place. We can argue if we want to about whether that economic emancipation is complete (the famous womens’ 77 cents to mens’ dollar, or is it a motherhood pay gap and so on) but let’s leave that for another time. What is obviously and glaringly true is that women are much freer economically than they were a century ago. Wages for women back then were distinctly lower than they were for men. And no, this wasn’t particularly discrimination: some large part of what most people were hired for was physical muscle. Men have more of this so they got paid more. There were also strong social norms: I’m not quite sure of pre-WWI America but in my native UK the only respectable jobs for an adult woman (ie, something that the bourgeois would be happy to see their daughters go into) were nursing or teaching. And as a result of this paucity of choice the wages were low in both professions (there’s a strong truth to the point that the rising wages of both teachers and nurses in recent decades are the result of their being free to work in other sectors these days).

The result of both of these things was that the wages of a female worker were not, except at the most basic, basic, level, sufficient to raise a child let alone support a family. I’m not saying that being a single parent these days is easy but it is at least possible as tens of millions of people are showing us.

Which brings us to marriage: yes, this is many things. Love, sex, companionship and so on. But it is also an economic contract (the only proof we need of this is to read some divorce settlements)
and marriage always has been an economic contract. Pretty much since humans arrived as a species it has been necessary to have two parents around in order for a child to have a reasonable chance of survival to an age where it would have its own children. This was true of hunter gatherer societies, of agricultural ones, of industrial ones, feudal and so on. It really is only in this past century, more so in the past 50 years, that it’s been possible for one person to both earn a living and raise a child or children. Yes, obviously people did do so as a result of having to do so but it wasn’t something that anyone did by choice simply because of the penury that resulted from their doing so. And yes, all of this is much more true of women than men.

March 23, 2015

Changing Times – Railroads & Canals I IT’S HISTORY

Filed under: Britain,Economics,Railways,Technology — Tags: , — Nicholas @ 02:00

Published on 10 Mar 2015

It certainly is no big deal to have a small cruise along the canals or ride a train. But what is essential infrastructure today had to be invented out of necessity in the late 18th and early 19th century. In our new episode Brett tells you everything about canals and railways and how they changed the way we transport things.

March 22, 2015

National Review columnist says Obama is right and his critics are wrong … about the TPP negotiations

I’m a very strong free-trader, but what I’ve heard about the Trans-Pacific Partnership (TPP) negotiations makes me feel that it’s less to do with any kind of free trade and much more to do with “managed” trade, where favoured companies get sweetheart deals and cronies get their cut of the action. In spite of that, National Review‘s Kevin Williamson says we should all hold our noses and follow behind President Obama and sign the TPP so we can find out what’s in it, so everyone can get their free unicorn … or something:

If there were $3 trillion sitting on the sidewalk, would you stoop to pick it up? That is the main question facing advocates of the Trans-Pacific Partnership — a proposed treaty to liberalize trade and investment among a dozen nations including the United States, Australia, Canada, New Zealand, Singapore, and Japan — and the trade-and-investment accord’s antagonists, too.

“The first thing you need to know is that almost everyone exaggerates the importance of trade policy,” writes TPP critic Paul Krugman in the New York Times. That may seem a strange sentiment for a man who won the Nobel Prize in economics (*) for his work on trade — perhaps the Sveriges Riksbank exaggerated the importance of trade economics? — but Professor Krugman has a point. The effects of large-scale international accords in trade and other economic areas are difficult to forecast, and such deals interact with other economic realities in ways that are not always entirely obvious. When NAFTA was under consideration, we were warned about that infamous “giant sucking sound” by Ross Perot and other protectionists, while the free-traders predicted that the accord would prove a massive boon to the U.S. economy, as well as to those of Mexico and Canada. The reality, as measured by the Congressional Budget Office and others, is that NAFTA has had a small positive effect on U.S. economic growth. Human progress is made up mostly of small positive effects. Beware policymakers offering dramatic promises: As Daniel Hannan points out, those advocating the adoption of the euro promised that it would add 1 percent GDP growth to each participating nation in perpetuity and that it would also provide a check on political extremism — wrong and wrong.

The dispute over TPP finds Barack Obama at odds both with congressional Democrats and with progressive activists, and making uncomfortably common cause with the most reliable partisans of free trade: most everybody who hates his guts.

Some Republicans have reservations about investing the president with “fast track” authority — meaning that he would be empowered to negotiate a deal that would then get a simple yes/no vote in Congress, which turns out to have a say in international affairs after all — because they are mindful of this imperial president’s habitual infliction of violence on the Constitution and of his seething contempt of the legislative branch in which he served for approximately eleven minutes. But it is unlikely that Republicans will in the end say no to a trade deal.

Professor Krugman’s case against TPP is, in brief, “meh.” He offers very little in the way of substantive criticism of the proposed accord, instead pooh-poohing it as modest, something that might add no more than 0.5 percent, and probably not even that, to the incomes of the participating nations. Those nations represent more than one third of the world’s economic output, though. Brad DeLong of the Washington Center for Equitable Growth addresses Professor Krugman’s sniffing directly: What if the additional growth were only half that 0.5 percent number? “In a Pacific region whose GDP is now approaching $30 trillion/year,” he writes, “that is $75 billion/year. Capitalize that at 4 percent/year and we get a net addition to world wealth of $3 trillion. That is indeed a very small number relative to the wealth of the world both now and discounted into the future. But that is a rather large number compared to other things the U.S. government might do this year. So why not grab for it?”

March 19, 2015

Thirty years on, what was the impact of the Miners’ strike in Britain?

Filed under: Britain,Economics,Government,History,Politics — Tags: , , — Nicholas @ 05:00

Frank Furedi points out six ways that Britain’s political scene has changed as a result of the year-long miners’ strike:

To defeat the National Union of Miners, UK prime minister Margaret Thatcher and her Conservative government had to use almost every available resource, including the mass mobilisation of the police. The Miners’ Strike became the defining event of British politics in the 1980s. And in retrospect, it’s clear that it was the last class-focused dispute of its kind.

Over the past three decades, the political climate, culture and institutions that served as the background for the Miners’ Strike have fundamentally altered. Here are six things that changed enormously in the wake of that industrial conflict.

1) The defeat of the Miners’ Strike signalled the end of the era of militant trade unions


2) The demise of the British labour movement was paralleled by the decline of the left

The Labour Party has survived the post-1985 tumult, yes, but only by reinventing itself as the party of the middle-class, public-sector professional. Thanks to the vagaries of the electoral system, Labour can still have MPs in many of its traditional working-class seats. The decline of labourism also coincided with the implosion of the Stalinist communist movement and the collapse of the Soviet Union.


3) Paradoxically, the demise of the left has not benefited the right

Thatcherism, which was very much the dominant force during the Miners’ Strike, has lost its authority. Today’s so-called Conservatives regard Thatcher as an embarrassment and self-consciously distance themselves from her legacy. So defensive is the right today that it continually protests that it is no longer a ‘toxic brand’.

There’s a deep-seated problem with how we measure the so-called “standard of living”

Filed under: Economics,History — Tags: , — Nicholas @ 04:00

My family are tired of hearing me say any variation on the expression “the past is a foreign country”, but I ring the changes on that phrase because it at least frames some of the problem we have in trying to comprehend just how much life has changed even within living memory, never mind more than a couple of generations ago. At the Cato Institute, Megan McArdle tries to avoid saying exactly those words, but the sense is still very much the same:

The generation that fought the Civil War paid an incredible price: one in four soldiers never returned home, and one in thirteen of those who did were missing one or more limbs. Were they better off than their parents’ generation? What about the generation that lived through the Great Depression, many of whom graduated into World War II? Does a new refrigerator and a Chevrolet in the driveway make up for decades and lives lost to the march of history? Or for the rapid increase in crime and civic disorder that marked the postwar boom? Then again, what about African Americans, who saw massive improvements in both their personal liberty and their personal income?

We should never pooh-pooh economic progress. As P.J. O’Rourke once remarked, I have one word for people who think that we live in a degenerate era fallen from a blessed past full of bounty and ease, and that word is “dentistry.” On the other hand, we should not reduce standard of living to (appropriately inflation adjusted) GDP numbers either. Living standards are complicated, and the tools we have to measure what is happening to them are almost absurdly crude. I certainly won’t achieve a satisfying measure in this brief essay. But we can, I think, begin to sketch the major ways in which things are better and worse for this generation. Hopefully we can also zero in on what makes the current era feel so deprived, and our distribution of income so worrisome.

My grandfather worked as a grocery boy until he was 26 years old. He married my grandmother on Thanksgiving because that was the only day he could get off. Their honeymoon consisted of a weekend visiting relatives , during which they shared their nuptial bed with their host’s toddler. They came home to a room in his parents’ house—for which they paid monthly rent. Every time I hear that marriage is collapsing because the economy is so bad, I think of their story.

By the standards of today, my grandparents were living in wrenching poverty. Some of this, of course, involves technologies that didn’t exist—as a young couple in the 1930s my grandparents had less access to health care than the most neglected homeless person in modern America, simply because most of the treatments we now have had not yet been invented. That is not the whole story, however. Many of the things we now have already existed; my grandparents simply couldn’t afford them. With some exceptions, such as microwave ovens and computers, most of the modern miracles that transformed 20th century domestic life already existed in some form by 1939. But they were out of the financial reach of most people.

If America today discovered a young couple where the husband had to drop out of high school to help his father clean tons of unsold, rotted produce out of their farm’s silos, and now worked a low-wage, low-skilled job, was living in a single room with no central heating and a single bathroom to share for two families, who had no refrigerator and scrubbed their clothes by hand in a washtub, who had serious conversations in low voices over whether they should replace or mend torn clothes, who had to share a single elderly vehicle or make the eight-mile walk to town … that family would be the subject of a three-part Pulitzer prize winning series on Poverty in America.

But in their time and place, my grandparents were a boring bourgeois couple, struggling to make ends meet as everyone did, but never missing a meal or a Sunday at church. They were excited about the indoor plumbing and electricity which had just been installed on his parents’ farm, and they were not too young to marvel at their amazing good fortune in owning an automobile. In some sense they were incredibly deprived, but there are millions of people in America today who are incomparably better off materially, and yet whose lives strike us (and them) as somehow objectively more difficult.

March 17, 2015

QotD: Subjective economic value

Filed under: Economics,Quotations — Tags: , , — Nicholas @ 01:00

Properly understood, all economic values are subjective. Some items have useful applications, but the relative value of those applications is itself subjective; there’s nutritional value in a pound of cauliflower, and there’s nutritional value to an ounce of Beluga caviar, and the difference in the price between the two is based on no objective criterion. Even scarcity does not explain the difference: There are more diamonds in this world than there are autographed photos of Anthony Weiner, but try giving your wife the latter for your anniversary and you’ll get a short and possibly violent lesson in the subjectivity of value. In fact, it is the subjectivity of value that makes exchange possible — if our values and preferences were perfectly aligned, we’d never trade anything for anything else, because we’d all value every item and service at precisely the same level, and there would therefore be no incentive to engage in commerce. That our preferences should be non-uniform ought not be surprising — our lives are non-uniform, too. If I operate an apple orchard, I am probably not going to buy apples from you at any price, unless perhaps they are a different sort of apple than the ones I grow. The rancher and the fisherman each assigns a different value to beef and fish than does his opposite number. Disagreement is fundamental.

The crude version of exchange — which is, unhappily, the common version — is inclined to suspect that there is an objectively correct price for a good, and that profit comes from duping somebody into paying more than the correct price for it. That error is fundamental to Marxism and other anti-capitalist philosophies, and it is implicit in such social phenomena as the anti-advertising movement, “Buy Nothing Day,” and similar political tendencies. But that bias does relatively little harm in the heads of greying Marxists, peddlers of “profit is a crime” banalities, and Occupy riff-raff. Where it is truly destructive is in the disorganized thoughts of the large majority of ordinary people with no particularly strong political commitments or economic orientation. Consider these phrases: “An honest day’s work for an honest day’s pay,” “just wages,” “fair price,” “obscene profits,” “price gouging,” “excessive executive compensation.” For any of those phrases to have any intellectual content, then there must be a price that is in some non-subjective sense the correct one. But if economic values are subjective — and they are — then “an honest day’s work for an honest day’s pay” can only mean one thing, that being the payment of an agreed-upon wage for an agreed-upon performance of labor, with “honest” referring only to the fulfillment of the agreement and saying nothing substantive about the terms of the agreement itself.

Kevin D. Williamson, “The Profit Police”, National Review, 2014-06-30.

March 16, 2015

Comparing statistics from different sources

Filed under: Economics,Government,USA — Tags: , — Nicholas @ 03:00

In Forbes, Tim Worstall points out that you need to be careful in using statistics sourced from different organizations or agencies, as they don’t necessarily measure quite the same thing, despite the names being very similar:

There are certain sets of statistics put out (largely by the OECD nations like the US and so on) which we really can believe as saying exactly what is indicated upon the tin.

However, that isn’t the same as saying that we should be willing to just accept all such US or OECD statistical numbers. Take, for example and this is one that I have banged on about for many a year now, The US and other OECD measures of poverty. The standard OECD measure of who is in poverty is below 60% of median income, adjusted for housing costs and household size. This is a measure of inequality, not actual poverty. It is also after all of the things that are done to reduce poverty, benefits, redistribution and all that. The US measure is, again adjusted for household size but not for housing costs, a measure of actual poverty. It is not related to average incomes but to what was low income in the early 1960s updated for inflation. And more significantly, it is before almost all of the things done to try to alleviate poverty. The OECD poverty measure is thus a measure of how much (relative) poverty there is after the things done to reduce poverty and the US standard number is a measure of how much absolute poverty there is before attempts to reduce poverty.

There’s nothing particularly wrong with either measure. But we’ve got to be very careful in acknowledging the difference between the two before we go and do something stupid like directly compare them, US poverty rates against the poverty rates of other OECD countries. Yet we do in fact see such comparisons being made all the time.

Another such little mistake of current interest is the way that we’re continually told that US average wages haven’t risen for decades. And it’s true, in one sense, that they haven’t. But wages aren’t actually what we should be looking at: total compensation from work is. And that’s been rising reasonably nicely over that same time period. The difference is in the benefits that we get over and above our wages from going to work. That health care insurance for example. This is more a matter of manipulation in the presentation of the statistics and if you see someone bleating about “wages” be very careful to check and see whether they are talking about what is of interest, compensation, or about wages which is a sign that they’re trying to mislead.

March 13, 2015

US corporate welfare by state

Filed under: Business,Economics,Government,USA — Tags: , , — Nicholas @ 02:00

Reason posted an infographic showing which corporation gets the most state support for every state in the union:

Click to enlarge

Click to enlarge

March 11, 2015

Venezuela, then and now

Filed under: Americas,Economics,Media — Tags: , , , — Nicholas @ 04:00

Kevin D. Williamson looks to the not-too-distant past to see how Venezuela got into the economic disaster they’re currently facing:

Venezuela had a good run of it for about five minutes there, at least in public-relations terms. When petroleum prices were booming, all it took was a few gallons of heating oil from Hugo Chávez to buy the extravagant praise of House members, with Representative Chaka Fattah (D., Philadelphia) issuing statements praising Venezuela’s state-run oil company “and the Venezuelan people for their benevolence.” Lest anybody feel creeped out by running political errands for a brutal and repressive caudillo, Joseph Kennedy — son of Senator Robert Kennedy — proclaimed that refusing the strongman’s patronage would be “a crime against humanity.” Kennedy was at the time the director of Citizens Energy, which had a contract to help distribute that Venezuelan heating oil — Boss Hugo was a brute, but he understood American politics.

Celebrities came to sit at his feet, with Sean Penn calling him a “champion” of the world’s poor, Oliver Stone celebrating him as “a great hero,” Antonio Banderas citing his seizure of private businesses as a model to be emulated in the rest of the world, Michael Moore praising his use of oil for political purposes, Danny Glover celebrating him as a “champion of democracy.” His successor, Nicolás Maduro, continued in the Chávez vein, and even as basics such as food and toilet paper disappeared the American Left hailed him as a hero, with Jesse Myerson, Rolling Stone’s fashionable uptown communist, calling his economic program “basically terrific.” Some of the more old-fashioned liberals at The New Republic voiced concern about Venezuela’s sham democracy, its unlimited executive authority, political repression, the hunting down of government critics, the stacking of elections and the government’s perpetrating violence inside polling places — but Myerson insisted that Venezuela’s “electoral system’s integrity puts the U.S.’s to abject shame.” Never mind that opposition leaders there are hauled off to military prison after midnight raids.

Vice President Biden, who can always be counted on to cut straight to the heart of any political question, ran into Maduro in Brazil and, noting the potentate’s thick mane, commented: “If I had your hair, I’d be president of the United States.” Tragically for the Sage of Delaware, hair transplants don’t work that way.

That is all going down the memory hole. The Obama administration has announced economic sanctions on Venezuela’s rulers and its intelligence agents, citing the “erosion of human-rights guarantees” – erosion, as though this were something new, as though Hugo Chávez hadn’t been a tyrant back when President Obama’s ally Representative Fattah was carrying his political water all over the eastern seaboard. In the New York Times’ account of Venezuela’s woes and Maduro’s misrule, there is no mention at all of the critical role the American Left played in lending legitimacy to Chavismo, of the so-called liberals and progressives who denounced legitimate protests against Maduro’s brutality as nefarious U.S.-backed coup attempts, who remained — and remain — silent on the regime’s censorship, political repression, torture, and economic incompetence. William Neuman of the Times did find an economist — a leftist economist, he assures us — who went so far as to say that certain aspects of the Chávez program “needed to be revised or even discarded to set the nation’s economy on the right track.”

Something that cannot go on forever, will not go on forever

Filed under: Economics,Government — Tags: , , , , , — Nicholas @ 03:00

At Ace of Spades H.Q., Monty brings the weekly DOOM post:

Boomers fret that their kids are ruining their retirements. Millennials, meanwhile, fret that their parents and grandparents are ruining their futures. That’s the reality of the welfare state, babies: it pits those who fund the government cheese against those who receive it. The welfare state was always a game of musical chairs, and it may be Millennials who are left standing when the music stops. Or they may wise up and just refuse to play the game any more.

I often catch heat for bashing on Boomers in this space, but mostly I’m trying to point out that the problem will require everybody to accept some unsavory truths. Boomers being mad at the young ‘uns, the young ‘uns being mad at the Boomers: they’re both getting mad at the wrong people. The problem is with the federal government, and at some point everybody is going to have to accept that the promises made by this corrupt bunch of assholes cannot be kept, and it’s morally wrong to burden future generations to pay for these lies.

For older people, the problem is one of sunk costs: we have to accept that much of the money we “paid in” to the welfare state was summarily squandered. There is no giant pile of money sitting in a vault somewhere. There is only an ocean of debt. For younger people, it’s a matter of accepting that a 65-year-old retiree can’t simply turn on a dime and reverse a lifetime’s worth of decision-making. Decisions driven by rules and incentives prevailing at the time the decisions were made. (In retirement planning as in investing more generally, uncertainty is the worst enemy.)

The perverse actions of the federal government over the past sixty or seventy years have put retirees fundamentally at odds with younger workers — the incentives are completely inverted depending on which group you happen to be in. It is this aspect of the welfare state that I loathe the most: the fracturing of familial and generational bonds, the mortgaging of the lives and labor of children (and generations yet unborn) who are being given no say in the matter. One of the absolute bedrock principles of liberty — political, social, cultural — is consent, and our children did not consent to have these burdens placed upon them.

Ultimately, a new compact between old and young is going to have to be forged. Young people need to understand that retirees, as a rule, didn’t choose to be put in the spot they’re in. Retirees need to understand that it’s morally wrong to expect young people to forgo their own financial futures to finance the retirements of their elders. There needs to be an understanding among all adults, young and old, that “fair” is no longer in the cards. We have been cheated, all of us, and the money is long gone. The best we can do now is mitigate the consequences of the fraud perpetrated on us. But the first step in that mitigation process is accepting that the status quo is unsustainable … and ethically reprehensible.

China’s “Catch up” growth

Filed under: China,Economics — Tags: , , , — Nicholas @ 02:00

In Forbes, Tim Worstall looks at last week’s announcement that China is (slightly) lowering their economic growth forecast.

On that larger scale though what people are worrying about is this. Catch up growth is easier than growth from the technological frontier. What is meant by this is that it’s a great deal easier to generate economic growth if you have an example in front of you of how to do things. To take a trivial example, if you can go and buy a mobile phone, take it apart to see how it works, it’s a lot easier to copy that technology than it is to invent it for the first time. And this is true of how you make cement, how you put up buildings, how you farm a field and so on. And at root that’s what economic growth is: becoming more efficient at doing all of these things as well as everything else. Each time you become more efficient at doing one task you free up resources to be doing something else. Thus you get both the original thing plus the new one from the same resources: this is the very definition of economic growth.

However, there’s a limit to such catch up growth. In certain areas China is right at that technological frontier (in some areas ahead of the rest of the world in fact). Which is where things become more difficult: there’s no one to copy. Therefore that invention has to happen domestically. This is obviously more difficult. But also it rather requires a certain set of institutions. The rule of law, property rights and so on. These aren’t things that China notably has (although things are very much better than they were decades ago). It’s those headwinds that need to be beaten. Bringing in these new institutions, embedding them in the society and the economy, without causing so much disruption as to slow down growth while they are done.

The standard jargon for this is “middle income trap”. To be crude about it the general feeling is that it’s pretty easy to go from dirt poor to middling income. The essence is really just to stop doing stupid things that hold economic development back. China’s done that very well even though they did start from a very low level of an immense number of very stupid things that Maoism did to hold economic growth back. The middle income trap is where the transition over to those institutions that promote technological frontier growth don’t appear (or are not imposed). And thus the stunning growth peters out.

QotD: Inequality

Filed under: Economics,Quotations,USA — Tags: , , , , — Nicholas @ 01:00

The left has a habit of framing “inequality” (their current social-justice hobbyhorse) in economic terms, which is fortunate because it makes debunking their nonsense easier. The left’s fundamental bit of chicanery lies in their failure to define “inequality” in any rigorous way. This is very intentional, for it allows them to frame inequality however they please — generally in the usual race/gender/class terms and using money as a yardstick. Rich white men have too much money; poor brown people (especially poor female brown people) have too little; therefore equality demands a reapportioning of the money so everybody has more or less the same amount. This is not socialism, they insist (bizarrely, given that this is pretty much the textbook definition of socialism). This is fairness.


Ultimately, the left’s vision of “equality” is not an empowering vision; it is a cramped and stingy philosophy of reduced expectations and lowered hopes. The unspoken (but never unclear) theme is that it is the State, not individuals or families, who should own and dispense of wealth. A happy man, in the view of the left, is one who receives money from the State and then spends it on consumption with no thought given to the future (for the future belongs to the State). Legacy is what the State says it is. The citizen should always be a creature of the now, concerned with nothing but short-term needs and gratifications, and with no allegiances beyond the vital one to the State.

Monty, “Wealth as an end and wealth as means to an end”, Ace of Spades HQ, 2014-06-24.

March 10, 2015

Megan McArdle on the politics of aging

Filed under: Economics,Health,USA — Tags: , , , — Nicholas @ 02:00

As with most western countries, the extension of what we consider “normal lifespans” creates financial and demographic changes that our social welfare systems are struggling to keep up with:

Who will take care of all the old people?

That’s the theme of Nicholas Eberstadt’s latest piece on demographics, which I highly recommend to all of you. The core problem of the welfare state is that it relieves people of the need for family to take care of them, but it does not relieve society of the need for caretakers. In fact, because there’s evidence that more generous social-security systems cause people to reduce their fertility, you can argue that these systems are undercutting the very actuarial basis upon which they depend.

The effect is what social-security systems are struggling with around the world: As the ratio of workers to retirees declines, it gets harder and harder to raise the tax revenue to cover benefits. Though Americans talk anxiously about the fiscal health of our systems, international pension-reform wonks actually look enviously at our system, which contains fewer of the incentives for earlier retirement that plague many countries.

But our demographic transition is not just a problem of pension math. There’s also the problem of what it does to economic growth as society ages. As workforce growth slows, so does gross domestic product growth. In theory, this can be made up with greater productivity growth. But productivity growth is moving in the wrong direction — and because older people tend to be more risk-averse as workers and investors, that too may be a natural result of an aging society.

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