This passage should be read as thinly veiled autobiography and confession. This week a former senior public servant told me that when the Conservatives came to power in 2006, they inherited structural surpluses, booming oil prices and shrinking public debt, and they acted the way trust-fund kids do. “These were like kids in a candy store who had all this allowance. ‘Wow, we can do all this stuff?’ ”

But don’t take my nameless source’s name for it. Take Jim Flaherty’s. His first budget speech, in 2006, carried the title “Focusing on Priorities.” And what did he describe as priorities? In order: “Providing immediate and substantial tax relief,” he said. “Encouraging the skilled trades.” “Families and communities.” “Investing in infrastructure.” “Security.” “Accountability.” “Expenditure management.” “Restoring fiscal balance for our Canadian federation.” And right down there at the bottom, “prosperity.” So you can’t say it wasn’t the No. 1 priority. It’s right there in ninth place.

In Flaherty’s 2007 budget speech, the word “growth” appeared once.

But sometimes the world changes and the trust fund goes bust. For Harper, that happened in the first week of December 2008, when he had to fight like a street gang to keep the job he thought he’d just been re-elected to. So much changed after that. He won in 2011 by running on the economy after years of running away from it. And now here he was in Davos to tell everyone about “the good, growth-oriented policies. The right, often tough choices.”

Flaherty is my local MP, so I’m well acquainted with his habit of talking like a conservative, but running the finance ministry like one of Pierre Trudeau’s acolytes. It must really be galling him that he has to act like a grown-up for the coming budget. As I’ve said more than once, if you factor out the military and foreign affairs aspects, there were few things that Harper did that wouldn’t have been done just as readily by Paul Martin. And I mean Martin as PM, not in his more successful guise as minister of finance.

Parents, wanting to encourage the idea that working and making money is a good idea, drive around to buy the lemon, sugar, designer bottled water, cups, spoons, napkins, a sign or two, and probably a paper table cloth.

Aside from time and gas, the outing adds up to something north of $10. At the opening of business the next day, the kids find business is slow to nonexistent at $1 per cup. So, they start to learn about market demand and find that business becomes so brisk at only 10 cents per cup that they are sold out by noon, having served 70 cups of lemonade and hauled in $7.

[. . .]

There is a strand of economics, we’ll call it the K-brand, that sees all this as worthwhile. They add together the $10 spent by the parents to back the venture and the $7 spent by the customers and conclude that an additional $17 of spending is clearly a good thing. Surely, the neighborhood economy has been stimulated.

To the family it is a loss, chalked up as a form of consumption. If this were a business enterprise it would be a write-off. In classical economics it is a “mal-investment.”

[. . .]

But that is not how it works in government accounting. While a private business must adjust its books to reflect the losses from an intended investment that went bad, governments never do that.

When a government “invests” in, say, an airport in Johnstown, Pa., all the expenditures for labor and materials are recorded as investments and are additions to national output. Never mind that when it is later discovered that only three people a day want to fly to or from the airport, no adjustment to national wealth will reflect the folly of this “mal-investment.”

If the airport had been financed by purely private, commercial enterprises, the initial expenditures would have been recorded as investment spending, but when reality struck and the entire project was written off as a total loss, the business-profit component of national output would decline. That is, a previous bad “investment” reduces, rather than augments, current national income.

… I believe that the process of creating employment is explained not by the theories of Keynes, but rather by the theories of Adam Smith and David Ricardo. Smith famously described the advantages of specialization and division of labor. Ricardo pointed out the gains from trade that come from consuming goods that others produce more efficiently. From the perspective of Smith and Ricardo, real jobs emerge in the context of patterns of sustainable specialization and trade.

Unfortunately, the patterns of specialization and trade that had emerged five years ago were not sustainable. Many jobs in home construction, durable-goods manufacturing and distribution, and mortgage finance were dependent on housing markets with ever-rising prices. In the U.S. and the U.K. in particular, the finance industry expanded well beyond its true economic value. Once the property bubbles burst, these jobs were exposed as not viable. Meanwhile, ongoing creative destruction brought about by the Internet and globalization have continued to allow substitution of capital and emerging-market labor for industrialized countries’ labor in many sectors. Together, these phenomena have caused widespread dislocation.

More government spending will not bring back the days when supposedly triple-A-rated mortgage securities could be fashioned out of dodgy loans to unqualified borrowers. Doing so would not halt the ongoing improvements in productivity in manufacturing and retail trade. It would not facilitate the adjustments that are needed in the mix of skills in the labor force. The necessary adjustments can only be made by the decentralized efforts of entrepreneurs.

[. . .]

The word “sustainable” in “patterns of sustainable specialization and trade” refers to profitability. Patterns that are profitable can be sustained. Patterns that are not profitable must eventually be shut down. That is the problem with patterns of trade created by government borrowing and spending: They are not sustainable, as has been illustrated in the U.S. by the failure of many of the “green energy” companies supported by President Obama’s stimulus package. Moreover, as European policy makers have discovered, there are limits to how much governments can borrow to fund their experimentations in specialization and trade.

BMW apologized after a PR strategy to pay for the naming rights to a weather system backfired — that system turned into the deep freeze that’s claimed dozens of lives across Europe.

The goal was to promote BMW’s Mini Cooper brand by paying Germany’s meteorological office 299 euros ($392) to name a system “Cooper” — a practice in place since 2002 to help fund weather monitoring work in Germany. Unfortunately for BMW, the system it was assigned to turned out to be a killer.

On the face of it, this seems like a pretty stupid notion: pay money to associate your brand with a major weather disturbance? Didn’t BMW’s PR folks notice that the association most people have with named weather is negative?

There are some things you don’t know you want until you get them and some that you don’t know you don’t until they’re yours. Take perfection. Now that Republicans have found in Romney pretty much all the qualities they’ve clamored for in modern presidential candidates—an aura of personal and public decorum, a record of civic-minded accomplishment backed by a record of fierce free-market self-enrichment, all wrapped up in a senior-edition beach bod and a profile fit for a gold coin—they don’t seem as wild for them as as they once were. Sure, they’re proving willing to accept Mitt (largely on the assumption that others will like him, which is how social-climbing teens choose prom dates) but what many of them now lust for in their hearts, as do certain non-Republicans who’ve caught the fever despite themselves, is something they never imagined tolerating, let alone secretly, irresistibly craving: a primordial walking gargoyle of pre-monogamous political id. Newt Gingrich, who seems to inhabit a middle state between swamp thing and statesman, frog and prince, is an arresting specimen in his own right, but as the fascination of a party whose base holds that man was created in God’s image without any scaled or beaked transitional versions, he’s an unaccountable astonishment.

He’s also an unshakable addiction. Like a drunken traveling salesman who hits on a freaky new sexual position during a night of Motel Six carnal fumbling, Newt has managed to put his stubby finger on a collective pleasure center—some undiscovered orgasmic political ganglia—that will require quadrennial stimulation from here on out. Whether he wins even one more delegate hardly matters in the screwy new scheme of things. As a style, as an archetype, he’s already prevailed, changing forever the nature of the game and earning the love of everyone who’s felt the game becoming sclerotic recently, the way games do when the money grows enormous, the press coverage relentless, and the players remain the same. Just as JFK and Reagan accustomed Americans to a higher standard of dashing glamor in Oval Office types, Newt has habituated a numbed electorate to a new level of effervescent perversity. He’s probably unelectable, it’s true. He’s entirely unforgettable, that’s truer. He has opened a process that’s routinely disparaged as a mere horse race, shallow and routine, to a whole new animal: the bred-for-mayhem Georgia kicking mule.

Dina Galassini does not seem to pose a threat to Arizona’s civic integrity. But the government of the desert community of Fountain Hills believes you cannot be too careful. And state law empowers local governments to be vigilant against the lurking danger that political speech might occur before the speakers notify the government and comply with all the speech rules.

Last October, Galassini became annoyed — like many Ron Paul supporters, she is easily annoyed by government — about the city’s plan to augment its spending with a $29.6 million bond issue, to be voted on by mail by Nov. 8. On Oct. 6, she sent emails to 23 friends and acquaintances, urging them to write letters to newspapers and join her in two demonstrations against the bond measure. On Oct. 12, before she could organize the demonstrations, she received a stern letter from the town clerk: “I would strongly encourage you to cease any campaign-related activities until the requirements of the law have been met.”

State law — this is the state of John McCain, apostle of political purification through the regulation of political speech — says that any time two or more people work together to influence a vote on a ballot measure, they instantly become a “political committee.” This transformation triggers various requirements — registering with the government, filing forms, establishing a bank account for the “committee” even if it has raised no money and does not intend to. This must be done before members of this fictitious “committee” may speak.

Timber company Sino-Forest is locked in a fascinating battle for survival against Carson Block, a stock analyst with a mixed record of publicity attacks on Chinese-based enterprises. With professional analysts reluctant to say what they make of Block’s “strong sell” report on Sino-Forest, I’m in no position to endorse it as a piece of financial advice or investigative journalism. Considered strictly as entertainment, however, the report is remarkable.

Block has documented that Sino-Forest operates with extraordinary opacity for a company whose holdings are surely very widely distributed — particularly, one assumes, within Canada. Sino-Forest claims to be doing hundreds of millions of dollars’ worth of sales through mostly unidentified “authorized intermediaries” in China — traders who are apparently happy to let the company buy title to trees, hold them as they appreciate, take on the bulk of the costs and risks in the meantime, and then snap up revenues when the trees are eventually converted into wood products. Block, having poked around a bit in the literal Chinese backwoods, questions whether much if any of the reported underlying activity is happening.

[. . .]

Sino-Forest is refusing, despite intense pressure, to make a full disclosure of the identities of the “authorized intermediaries” who are making its money. The company claims that to do so would put it at a competitive disadvantage, which makes one wonder why its business model ought to depend so heavily on sheer obscurity. One possible answer is that Sino-Forest’s real, fundamental business is some sort of cryptic regulatory arbitrage; that seems like a game potentially worth playing with paper assets in places that have a strong rule of law, but it is surely a dangerous one in a nominally Communist country, where a nationalization could be arranged in the space of an afternoon. (Or where some regional Party functionary could simply be bribed to “lose” crucial paperwork.)

Today, he posted a follow-up report:

Could a curious investor look at actual maps of timber controlled by Sino-Forest agents, you ask? Well, you see, it’s not exactly kosher for foreigners to carry around maps of remote parts of China. You can borrow them from forestry officials if you really need to. Will the local forestry bureaus confirm Sino-Forest’s claims about plantations operated by its agents? Well, sometimes they’ll give you a certificate of sorts, for all the good it might do. “The confirmations are not title documents, in the Western sense of that term,” the committee report notes. (As I understand it, the Western meaning of “title document” is that it gives one an unquestioned, justiciable claim to ownership of something, whether the Party or the Army or the good Lord in heaven approve or not.)

[. . .]

The impression given is that you need influential “backers” to do business in China. The question for the Western investor, though it’s probably now moot, is whether the real role of these backers is to help exploit Chinese resources for the benefit of the Western shareholders or to help fleece Western shareholders for the benefit of Chinese suppliers and bureaucrats.

As Jon, my former virtual landlord puts it, this is a hobby horse I like to ride now and again.