This is a general and pernicious failing of the left in my view. They really, just really, don’t get what it is that markets do and do very well. What markets do do is they produce the information, through the price system, of who is willing to produce what at which price and who desires to consume what at which price. Thus we get an efficient allocation of scarce resources by our use of markets. And Hayek pretty much got his Nobel for proving that there is no other system to hand which can perform this function. The planner simply cannot gain enough information to be able to perform that function, nor process it real time (and no, computing can’t do it either, Allende and his computer to run the Chilean economy was wrong.)
It’s entirely possible to critique markets on the grounds of equity though. For example, too many people are too poor if we just leave it to the market. Perhaps we agree with that idea, perhaps we don’t: but that argues for changing peoples’ incomes through intervention, not for abolishing the market in the provision of goods. Or, as I’ve said before, if Chavez and Maduro want poor Venezuelans to be better off then send them more money. Don’t mess with the market: the result of that messing will inevitably be the sort of breakdown we see here.
As for the people of Venezuela, well, obviously, this isn’t going to work out well. Their rulers have pretty much bankrupted the country through their incompetence: and now they’re taking more economic power unto themselves?
Not going to work, is it? Even competent governments haven’t been able to make nationalised food distribution systems work…
Tim Worstall, “Amazingly, Maduro Is Going To Make The Venezuelan Economy Even Worse. Yes, Worse”, Forbes, 2015-05-03.
May 28, 2015
May 24, 2015
Well, “proposes” isn’t quite the right word:
Let me describe first the requirements for the Evil Business Plan of Evil, and then the Plan Itself, in all it’s oppressive horror and glory.
Some aspects of modern life look like necessary evils at first, until you realize that some asshole has managed to (a) make it compulsory, and (b) use it for rent-seeking. The goal of this business is to identify a niche that is already mandatory, and where a supply chain exists (that is: someone provides goods or service, and as many people as possible have to use them), then figure out a way to colonize it as a monopolistic intermediary with rent-raising power and the force of law behind it. Sort of like the Post Office, if the Post Office had gotten into the email business in the 1970s and charged postage on SMTP transactions and had made running a private postal service illegal to protect their monopoly.
Here’s a better example: speed cameras.
We all know that driving at excessive speed drastically increases the severity of injuries, damage, and deaths resulting from traffic accidents. We also know that employing cops to run speed traps the old-fashioned way, with painted lines and a stop-watch, is very labour-intensive. Therefore, at first glance the modern GATSO or automated speed camera looks like a really good idea. Sitting beside British roads they’re mostly painted bright yellow so you can see them coming, and they’re emplaced where there’s a particular speed-related accident problem, to deter idiots from behaviour likely to kill or injure other people.
However, the idea has legs. Speed cameras go mobile, and can be camouflaged inside vans. Some UK police forces use these to deter drivers from speeding past school gates, where the speed limit typically drops to 20mph (because the difference in outcome between hitting a child at 20mph to hitting them at 30mph is drastic and life-changing at best: one probably causes bruises and contusions, the other breaks bones and often kills). And some towns have been accused of using speed cameras as “revenue enhancement devices”, positioning them not to deter bad behaviour but to maximize the revenue from penalty notices by surprising drivers.
This idea maxed out in the US, where the police force of Waldo in South Florida was disbanded after a state investigation into ticketing practices; half the town’s revenue was coming from speed violations. (Of course: Florida.) US 301 and Highway 24 pass through the Waldo city limits; the town applied a very low speed limit to a short stretch of these high-speed roads, and cleaned up.
Here’s the commercial outcome of trying to reduce road deaths due to speeding: speed limits are pretty much mandatory worldwide. Demand for tools to deter speeders is therefore pretty much global. Selling speed cameras is an example of supplying government demand; selling radar detectors or SatNav maps with updated speed trap locations is similarly a consumer-side way of cleaning up.
And here’s a zinger of a second point: within 30 years at most, possibly a lot sooner, this will be a dead business sector. Tumbleweeds and ghost town dead. Self-driving cars will stick to the speed limit because of manufacturer fears over product liability lawsuits, and speed limits may be changed to reflect the reliability of robots over inattentive humans (self-driving cars don’t check their Facebook page while changing lanes). These industry sectors come and go.
Dan Mitchell clearly understands what modern western government is really all about:
May 19, 2015
I should say I’m no free-speech absolutist. I think the notion that we should treat pole dancing like constitutionally protected speech while we try to ban actual political speech is just one of the loopiest manifestations of our popular confusion over the First Amendment. In fact, government support for the arts doesn’t offend me in theory, it’s just how they do it in practice that bothers me.
Specifically, I cannot stand the way New Class bureaucrats think they must be autonomous from the taxpayers who pay their salaries. Imagine if we lived in anything like the “Christianist” theocracy so many lefties live in quaking fear of. Evangelical bureaucrats would likely fund art they liked. The professional Bohemians would shriek — with some justification — that the state was imposing its values on the rest of us. But when those same people are in driving the gravy train, they think there’s nothing wrong — and everything right — with imposing their values.
Of course, this is a problem that extends far beyond outposts like the National Endowment for the Arts (NEA). Public teachers’ unions and ed-school priests hate the idea that parents and other taxpayers should have a real say in how education money is spent. Bureaucrats in general have become a kind of secular aristocracy that resents second-guessing by the people who fund their will-to-power.
When voters say that bureaucrats shouldn’t spend money on X, the bureaucrats shriek “censorship!” But it is only the equivalent of censorship if you work from the assumption that it’s all the government’s money anyhow. As Bill Clinton once said about the federal surplus, “We could give it all back to you and hope you spend it right.” But if we did, alas, not enough of you would spend it on urophagic art.
Jonah Goldberg, “Bureaucrats Use Taxpayer Money to Subsidize Their Own Values — and No One Else’s”, National Review, 2015-05-09.
May 16, 2015
Published on 11 May 2015
The American ideal of limited government on life support. Is it time for civil disobedience? Charles Murray says yes. Murray has been writing on government overreach for more than 30 years. His new book, By The People, is a blueprint for taking back American liberty. Jonah Goldberg sits down with Murray to discuss civil unrest in Baltimore, the scope of the government, and why bureaucrats should wear body cameras.
According to AEI scholar, acclaimed social scientist, and bestselling author Charles Murray, American liberty is under assault. The federal government has unilaterally decided that it can and should tell us how to live our lives. If we object, it threatens, “Fight this, and we’ll ruin you.” How can we overcome regulatory tyranny and live free once again? In his new book, By the People: Rebuilding Liberty Without Permission (Crown Forum, May 2015), Murray offers provocative solutions.
At The Diplomat, Catharine Putz wonders if there can be a Kazakhstan without President Nursultan Nazarbayev:
In a new report, the International Crisis Group says that Kazakhstan is facing a stress test – its only president since independence turns 75 this summer and Russia’s “actions in Ukraine cast a shadow over Kazakhstan.” To date, the report notes, Kazakhstan’s devotion to continuity has trumped needed democratic reforms. Nursultan Nazarbayev’s recent landslide reelection demonstrates his absolute centrality to political stability in the country and could prove to be “a serious vulnerability.”
The report encourages Kazakhstan to act soon – reconfirming its independence from Russia and lifting the veil on government operations in order to reassure citizens and foreign powers “that the state is not the work of one man or an exclusive ethnic project and that the transition to a post-Nazarbayev era will be smooth.” The report recommends that Kazakhstan continue to pursue a multi-vector foreign policy by engaging equally with Russia and the EU; take a “recognizable role” in pursuing a solution to the Ukraine crisis; give senior officials – other than Nazarbayev – some stage time; practice restraint in issues of language, ethnicity, and nationalism; and broaden economic development beyond Astana.
This is not the first time parallels have been drawn between Ukraine and Kazakhstan. Kazakhstan, like all of Central Asia, had a sizeable ethnic Russian population when the Soviet Union dissolved. That population has dwindled; in a country of 17 million a 2009 census determined that ethnic Russians accounted for 23 percent, ethnic Kazakhs more than 60 percent. This is a more modern development, as it wasn’t until the mid-1980s that the ethnic Kazakh population bypassed that of ethnic Russians in the region. Now, most ethnic Russians are concentrated along the northern border with Russia.
How do you say “Après moi, le déluge” in Kazakh?
The governments of these United States, from the federal to the local level, have managed to insinuate themselves between citizens and their property at every point of significance. In that, our governments are very much like most other governments, liberal and illiberal, democratic and undemocratic. We have allowed ourselves to be in effect converted from a nation of owners to a nation of renters. But while medieval serfs had only the one landlord, we have a rogue’s gallery of them: the local school board, the criminals at the IRS, the vehicle-registry office, etc. Never-ending property taxes ensure that as a matter of economic function, you never really own your house — you rent it from the government. Vehicle registration fees and, in some jurisdiction, outright taxes on automobile ownership ensure in precisely the same way that you never really own your car: You rent it from the government. Stock portfolio? Held at the sufferance of politicians. A profitable business? You’ll keep what income they decide you can keep. Your own body? Not yours — not if you use it for profitable labor.
A Who down in Whoville? You should be so lucky: Welcome to Whomville, peon.
Kevin D. Williamson, “Property and Peace”, National Review, 2014-07-20.
May 15, 2015
David Henderson explains:
Of the 80 million acre feet a year of water use in California, only 2.8 million acre feet are used for toilets, showers, faucets, etc. That’s only 3.5 percent of all water used.
One crop, alfalfa, by contrast, uses 5.3 million acre feet. Assuming a linear relationship between the amount of water used to grow alfalfa and the amount of alfalfa grown, if we cut the amount of alfalfa by only 10 percent, that would free up 0.53 million acre feet of water, which means we wouldn’t need to cut our use by the approximately 20 percent that Jerry Brown wants us to.
What is the market value of the alfalfa crop? Alexander quotes a study putting it at $860 million per year. So, assuming, for simplicity, a horizontal demand curve for alfalfa, a cut of 10% would reduce alfalfa revenue by $86 million. (With a more-realistic downward-sloping demand for alfalfa, alfalfa farmers would lose less revenue but consumers would pay more.) With a California population of about 38 million, each person could pay $2.26 to alfalfa growers not to grow that 10%. Given that the alfalfa growers use other resources besides water, they would be much better off taking the payment.
May 13, 2015
Fred Frailey discusses the U.S. Department of Transportation mandate that all crude oil trains longer than 69 cars must be equipped with electronic brakes by 2021 or they will restrict the speed of oil trains to 30 MPH at all times. The current standard braking system for railroads in North America is pneumatic, which have worked well for decades, but have inherent problems as modern trains have gotten longer and heavier. One of the biggest problems is that pneumatic brakes have a relatively long activation time — when the engineer operates the brake in the lead locomotive, it takes quite some time for that to propagate all the way through the train. This creates situations which can cause derailments as the lead cars begin to slow down, while the rest of the train is still travelling at full speed.
The preferred replacements are called electronically controlled pneumatic brakes (ECP), where instead of the brakes operating by pressure changes in the air line, the brakes would be controlled by a separate electronic circuit that would allow simultaneous brake application in all cars in the train.
It seems electronic braking has no friends in the railroad industry. I find this puzzling. Research I’ve read suggests there is both a safety and business case to be made. One explanation for the bum’s rush being given ECP comes from someone whose career was immersed in railroad technology: “The mechanical departments say the ECP brakes don’t save enough on wheels and brake shoes to justify implementation. The track departments say that ECP brakes don’t reduce rail wear enough to justify implementation. Transportation departments say that ECP brakes don’t save enough fuel to justify implementation. And improved train running times, improved train dynamics, and improved engineer performance are all soft-dollar savings which don’t count. No one ever bothers to sum up total benefits.” Silos, in other words.
So I’ll make the case for ECP. (By the way, the standards were developed two decades ago by the same AAR that now vigorously opposes their implementation.) A train equipped with electronic braking is hard-wired, allowing instant communication from airbrake handle in the locomotive to every brake valve on the cars. The principal advantages are that all brakes instantly apply and release at the same time, the air supply is continually charged, engineers can gradually release and reapply brakes, and undesired emergency braking (dynamiters, they’re called) virtually disappear. In-train forces, such as slack roll-in and roll-out, are greatly reduced, and that lessens the risk of derailment. Moreover, stopping distance is reduced 40 to 60 percent, permitting higher train speeds and higher speeds approaching restricting signals. Longer trains are possible. Longer trains run at higher speeds increase the capacity of the railroad network. Because air is always charging, braking power is inexhaustible; plus, a train can stop and instantly restart. Brakes, draft gear, wheels, and bearings require less maintenance. Existing federal regulations would allow train inspections every 5,000 miles instead of the present 1,500 or 1,000 miles.
Those are a lot of advantages. In a report commissioned by the Federal Railroad Administration in 2005, the consulting company Booz Allen Hamilton estimated the cost of full implementation of ECP at $6 billion and the measurable savings (not including added network capacity) at $650 million a year. Booz recommended that ECP conversion begin with coal trains loaded in Wyoming’s Powder River Basin, then to other types of unit trains (presumably including intermodal trains), and finally the rest of the car fleet — all in a 15-year time frame. “As applied to western coal service,” its report stated, “the business case is substantial,” with a recovery of all costs within three years.
Several things are going on here. Silos are one. Nobody is looking at the big picture, just his or her little piece of it. The boys in the Mechanical Silo could care less about increased network capacity. The occupants of the Finance Silo don’t want to divert cash flow away from share buybacks, their favorite toy. Most of those in the CEO Silo didn’t come up on the operating side and are probably bored by the subject. In a conservative, mature business like railroading, risk taking and even forward thinking are not rewarded. And the cost of hard-wiring the car fleet would primarily be borne by shippers, who own most of the equipment, whereas railroads would reap the benefits. How to share the benefits with car-owning shippers leads to very difficult negotiations.
May 12, 2015
Published on 27 Jan 2015
Why do taxes exist? What are the effects of taxes? We discuss how taxes affect consumer surplus and producer surplus and discuss the concept of deadweight loss at length. We’ll also look at a real-world example of deadweight loss: taxing luxury yachts in the 1990s.
May 11, 2015
In The Walrus, Manjushree Thapa explains why Nepal was so badly prepared for the earthquake:
Following the April 25 earthquake, Nepalis have had to learn the value of preparedness in the most painful way possible. In the aftermath, Pushpa Acharya, a Nepali friend at the University of Toronto, observed, “Knowledge was not our problem.” Indeed. We all knew that our country sits on an active fault line, where the subcontinent collided with the Eurasian plate with such force it created the Himalayas. The last big quake took place in 1934. Others have since struck, but none with the force of 1934’s 8.0 or April 25’s 7.9. We knew that a big earthquake was due.
It was our duty to prepare, and though some of us did so individually, as a society we ignored the warnings. In the past ten days, during search and rescue, and then the beginnings of relief, we’ve had to do some hard thinking about how our country could become more responsible going forward. The root problem may seem obvious: Nepal is one of the poorest countries in the world. Its poverty is, however, a symptom of our history of ill governance, and the reason for our national failure to prepare, which has kept us from becoming a functioning democracy.
When the earthquake struck, the country was in a deep and deeply depressing stupor. The governing parties — a coalition of the Nepali Congress Party and the Unified Marxist Leninists — had reached an impasse with Nepal’s thirty-three opposition parties about what kind of constitution to draft. There was no plan for the country as a whole, let alone in the case of an emergency. The drafting of a constitution has preoccupied, confounded, and eluded Nepal’s polity since 2006, when the Maoists ended a ten-year insurgency to join forces with other parties to remove Gyanendra Bir Bikram Shah. Nepal’s king had used the war as an excuse to end a fragile fifteen-year spell of democracy and install his own military-backed rule. A mass movement restored democracy, and the subsequent peace process promised to restructure the country along just and equitable lines through the drafting of a new constitution
May 5, 2015
When I say monarchy I am not talking about the wishy-washy monarchy we pretend to have in the UK. I am talking about real monarchies, monarchies red in tooth and claw, monarchies that can at minimum hire and fire ministers and start wars.
Now, I can almost hear the pedants shouting “But those are precisely the powers the Queen has” To which I say “Only in theory”. Should the Queen or any of her successors ever attempt to actually exercise those theoretical powers they would be out of office in a matter of nano-seconds. Britain is a republic.
When did it become one? I think we can be pretty precise with the dates: sometime between 1642 and 1694. 1642 is the date of the outbreak of the English Civil War, when Charles I tried to impose his idea of absolute monarchy. 1694 is the date William III accepted that his powers were extremely limited. Since then it has been Parliament that makes the laws and votes funding – without which making war becomes extremely difficult.
But think of what happened in that period: four civil wars, one military dictatorship and a foreign invasion.
You think that was bad? Try the French. Between 1789 and 1871 they saw four monarchies, three republics, three foreign invasions and a 20-year war with the rest of Europe.
And now look at what happened in the 20th century. Germany, Russia, Austria-Hungary, China, Turkey, Spain and Portugal all made the same transition from monarchy to republic. I need not dwell on the German or Russian experiences — they are well enough known but all the others follow a similar pattern. China saw a 20-year civil war followed by Mao’s communist regime; Spain, a monarchy, followed by a republic followed by a civil war followed by a dictatorship followed by a monarchy followed by a democratic republic. Even Portugal saw two revolutions, a dictatorship and a series of bloody colonial wars.
The point is that in every case the transition from monarchy to republic is bloody and protracted.
Patrick Crozier, “What caused the First World War? Part V: Monarchies and Republics”, Samizdata, 2015-04-29.
April 28, 2015
Last week, Michael Geist pointed out that the tax credits and other inducements offered by state and provincial governments to attract TV and movie business are a bad deal for everyone except the media companies:
The widespread use of film and television production tax subsidies dates back more than two decades as states and provinces used them to lure productions with the promise of new jobs and increased economic activity. The proliferation of subsidies and tax credits created a race to the bottom, where ever-increasing incentives were required to distinguish one province or state from the other.
In recent years, governments have begun to rethink the strategy. States such as Arizona, Michigan, New Mexico, and Iowa suspended or capped their programs. Louisiana found that it lost $170 million in tax revenue in a single year. In Canada, the Quebec government’s taxation review committee recently admitted that its provincial film production tax credit was not profitable and that numerous studies find that there is little economic spinoff activity.
But the most notable Canadian study on the issue has never been publicly released and is rarely discussed. The Ontario government’s Ministry of Finance conducted a detailed review of the issue in 2011, delivering a sharply negative verdict on the benefits associated with spending hundreds of millions of dollars each year in tax credits. It recommended eliminating a 25 per cent tax credit for foreign and non-certified domestic productions that would have saved $155 million per year.
April 21, 2015
Earlier this month, Alvaro Vargas Llosa examined the economic success of Singapore under the authoritarian rule of Lee Kuan Yew:
Lee Kuan Yew, Singapore’s legendary statesman, who died last month at the age of 91, posed a challenge to those of us who believe in political and economic freedom (and all other freedoms). His combination of authoritarianism and economic freedom, of social engineering and self-reliance, worked. The result was a society that is more prosperous than most others, but free only in some respects.
For years, the best examples one could come up with to show that the marriage of economic and political liberty could work were the liberal democracies of the developed world, whose achievements originated in centuries past and different circumstances.
Lee Kuan Yew’s credentials became strong as many countries that also gained independence in the 1950s or 1960s opted for a mix of nativism and collectivism that kept them poor while tiny Singapore, with no natural resources, emerged as an economic powerhouse. While Mao, Ho Chi Minh, and Castro — not to cite Mobutu, Idi Amin Dada, and others — destroyed the chances of a decent life for many generations, Lee Kuan Yew created the conditions for a 124-fold increase in Singapore’s per capita income in half a century.
Singapore’s case is exceptional, which makes it a tough challenge for those of us who think freedom is best served by not carving it up. My belief is that Singapore has been able to preserve its curious mix because of the absence of prosperous liberal democracies around it. But its model is based on globalization, and it’s therefore porous to good ideas.
In a world in which more countries, including Asian ones, end up successfully embracing democracy under the rule of law as well as free trade, it will be impossible for the city-state to avoid the comparison and the contagion. It is one thing to preserve an authoritarian model because your neighbors espouse a less successful one, and quite another to perpetuate it in the face of equally or even more successful societies that espouse a freer model.
April 15, 2015
… boredom is the deadly secret weapon of the bien-pensant technocrats of the EU and the UN. “They wear outsiders down with the tedium of their arguments and the smallness of their fine print, so that by the time anyone else notices what they’re up to the damage has been done and it’s too late to do anything about it.”
James Delingpole, “Green Global Governance: How Environmentalists Have Taken Over the World”, Breitbart.com, 2014-06-25.