Quotulatiousness

December 11, 2017

QotD: Occupational licensing

Filed under: Bureaucracy, Government, Law, Liberty, Quotations — Tags: , , , — Nicholas @ 01:00

… occupational licensing laws and Competitor’s Veto laws exclude would-be entrepreneurs from the marketplace — with disproportionately negative consequences for members of minority groups — […] Congress could act today to protect the fundamental human right of economic liberty against unjust state interference.

Licensing laws tend to have particularly harsh consequences on members of minority groups for a couple reasons. First, if a law requires a person to have, say, a college degree to practice the trade of interior design (which is the law in Florida), people who have less money and time to spend in college will find that avenue of opportunity closed to them. Since black and Hispanic Floridians are about 30 percent less likely to have a college degree, they will suffer more from this absurd licensing requirement than others will. Competitor’s Veto laws that forbid a person from practicing a trade unless they get permission from the businesses already operating in that industry are also very likely to create a sort of Old Boys Network, and to exclude entrepreneurs who lack political connections. Second, in a more general sense, any law that restricts economic opportunity for some to benefit others — as licensing laws tend to do — are likely to benefit those who have more political influence and can therefore get the government to regulate in ways favorable to them. Since members of minority groups have less political influence, they tend to be the ones excluded.

Timothy Sandefur, “Testifying to the U.S. Senate Oversight Subcommittee Tuesday about economic liberty and minorities”, Freespace, 2015-09-30.

November 12, 2017

QotD: Why politicians are all the same kind of people

Filed under: Government, Politics, Quotations — Tags: , — Nicholas @ 01:00

Why is it, then, that the virtues and decencies that we generally expect people to have in their private life are so manifestly absent in the people who succeed best in politics and government? The answer lies in the nature of government itself — at least, government as we currently know it all over the world, a system of imposed, involuntary, monopoly rule whereby the system’s kingpins use military and police power along with ideological enchantment to plunder and bully innocent people — and to get away with doing so year after year. Just as only physically tough, fearless, aggressive persons succeed as prize fighters, so only dishonest, slick, evasive, power-hungry, unscrupulous, and vicious persons have what it takes to succeed in a system whose very foundations — violence, aggression, extortion, and misrepresentation — are completely at odds with private standards of just and virtuous conduct.

If someone like me — elderly, small, weak, timid, and untrained — were put in the ring to fight for the heavyweight boxing championship, you would not expect me to survive more than a few seconds. Likewise, if someone like me — someone who respects other persons’ natural rights to life, liberty, and property and who abhors dishonesty, extortion, aggression, and unnecessary violence — were thrown into the political or governmental arena, I would scarcely last much longer. There’s a reason why today’s leading campaigners are such morally ugly individuals: they have a comparative advantage in taking the kinds of actions one must take in order to reach the pinnacle of government power.

Robert Higgs, “Why the Worst Get on Top: Comparative Advantage”, The Beacon, 2016-03-16.

November 5, 2017

QotD: Explaining comparative advantage

Actually, it’s dead easy. No math, no arithmetic. It is in fact the soul of common sense. But you have to understand that comparative advantage is the principle of cooperation, as against competition. The word “advantage” gets us thinking of competition, which is perfectly reasonable in our own individual lives — we do compete with other businesses or other writers or whomever. But the system as a whole, whatever it is, does well of course by cooperating, in business or science or family life. It’s not all we do, admittedly. We also compete. But within a household or a company or a world economy the job is to produce a result in the best way, cooperatively. If you are running a household or a sports team or a world economy, you would want to assign roles to the various contributors to the common purpose sensibly. It turns out to be precisely on grounds of comparative advantage.

Consider Mum and 12-year old Oliver, who are to spend Saturday morning tidying up the garage. Oliver is incompetent in everything compared with Mum. He cannot sweep the floor as quickly as she can, and he is truly hopeless in sorting through the masses of rubbish that garages grow spontaneously. Mum, that is, has an absolute advantage in every sub-task in tidying up the garage. Oliver is like Bangladesh, which is poor because it makes everything — knit goods and medical reactors — with more labor and capital than Britain does. Its output per person is 8.4 percent of what it is in Britain. So too Oliver.

What to do? Let Mum do everything? No, of course not. That would not produce the most tidied garage in a morning’s work. Oliver should obviously be assigned to the broom, in which his disadvantage compared with Mum is comparatively least — hence “comparative advantage.” An omniscient central planner of the garage-tidying would assign Mum and Oliver just that way. So would an omniscient central planner of world production and trade. In the event, there’s no need for an international planner. The market, if Trump does not wreck it, does the correct assignment of tasks worldwide. Bangladesh does not sit down and let Britain make everything merely because Britain is “competitive” absolutely in everything. And in fact Bangladesh’s real income has been rising smartly in recent years precisely because it has specialized in knit goods. It has closed its ears to the siren song of protecting its medical reactor industry. It gets the equipment for cancer treatment from Britain.

Comparative advantage means assigning resources of labor and capital to the right jobs, whatever the absolute productivity of the economy. It applies within a single family, or within a single company, or within Britain, or within the world economy, all of which are made better off by such obvious efficiencies. Following comparative advantage enriches us all, because it gets the job done best. Policies commonly alleged to achieve absolute advantage lead to protection — that is, extortion, crony capitalism, and the rest in aid of “competitiveness.”

Dierdre N. McCloskey, “A Punter’s Guide to a True but Non-Obvious Proposition in Economics”, 2017-10-16.

October 7, 2017

Why We Should Privatize the Postal Service

Filed under: Bureaucracy, Business, Government, USA — Tags: , , — Nicholas @ 04:00

ReasonTV
Published on 6 Oct 2017

What’s the best way to make the Post Office faster and cheaper? Pull the government’s tendrils out of it and let it loose in the private sector.

October 1, 2017

Deirdre McCloskey on the rise of economic liberty

Samizdata‘s Johnathan Pearce linked to this Deirdre McCloskey article I hadn’t seen yet:

Since the rise during the late 1800s of socialism, New Liberalism, and Progressivism it has been conventional to scorn economic liberty as vulgar and optional — something only fat cats care about. But the original liberalism during the 1700s of Voltaire, Adam Smith, Tom Paine, and Mary Wollstonecraft recommended an economic liberty for rich and poor understood as not messing with other peoples’ stuff.

Indeed, economic liberty is the liberty about which most ordinary people care.

Adam Smith spoke of “the liberal plan of [social] equality, [economic] liberty, and [legal] justice.” It was a good idea, new in 1776. And in the next two centuries, the liberal idea proved to be astonishingly productive of good and rich people, formerly desperate and poor. Let’s not lose it.

Well into the 1800s most thinking people, such as Henry David Thoreau, were economic liberals. Thoreau around 1840 invented procedures for his father’s little factory making pencils, which elevated Thoreau and Son for a decade or so to the leading maker of pencils in America. He was a businessman as much as an environmentalist and civil disobeyer. When imports of high-quality pencils finally overtook the head start, Thoreau and Son graciously gave way, turning instead to making graphite for the printing of engravings.

That’s the economic liberal deal. You get to offer in the first act a betterment to customers, but you don’t get to arrange for protection later from competitors. After making your bundle in the first act, you suffer from competition in the second. Too bad.

In On Liberty (1859) the economist and philosopher John Stuart Mill declared that “society admits no right, either legal or moral, in the disappointed competitors to immunity from this kind of suffering; and feels called on to interfere only when means of success have been employed which it is contrary to the general interest to permit — namely, fraud or treachery, and force.” No protectionism. No economic nationalism. The customers, prominent among them the poor, are enabled in the first through third acts to buy better and cheaper pencils.

[…]

Indeed, economic liberty is the liberty about which most ordinary people care. True, liberty of speech, the press, assembly, petitioning the government, and voting for a new government are in the long run essential protections for all liberty, including the economic right to buy and sell. But the lofty liberties are cherished mainly by an educated minority. Most people — in the long run foolishly, true — don’t give a fig about liberty of speech, so long as they can open a shop when they want and drive to a job paying decent wages. A majority of Turks voted in favour of the rapid slide of Turkey after 2013 into neo-fascism under Erdoğan. Mussolini and Hitler won elections and were popular, while vigorously abridging liberties. Even a few communist governments have been elected — witness Venezuela under Chavez.

September 3, 2017

QotD: Picketty’s misunderstanding of the supply and demand curves

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

The technical flaws in Piketty’s argument are pervasive. When you dig, you find them. The fundamental problem is that Piketty does not understand how markets work. In keeping with his position as a man of the left, he has a vague and confused idea about how supply responds to higher prices. Startling evidence of Piketty’s miseducation occurs as early as page 6.

He begins by seeming to concede to his neoclassical opponents: “To be sure, there exists in principle a quite simple economic mechanism that should restore equilibrium to the process: the mechanism of supply and demand. If the supply of any good is insufficient, and its price is too high, then demand for that good should decrease, which would lead to a decline in its price.” The words I italicize clearly mix up movement along a demand curve with movement of the entire curve, an error of first-term college students. The correct analysis is that if the price is “too high” it is not the whole demand curve that “restores equilibrium,” but an eventually outward-moving supply curve. The supply curve moves out because entry is induced by the smell of super-normal profits.

Piketty does not acknowledge that each wave of inventors, entrepreneurs, and even routine capitalists find their rewards taken from them by entry. Look at the history of fortunes in department stores. The income from department stores in the late 19th century, in Le Bon Marché, Marshall Field, and Selfridge’s, was entrepreneurial. The model was then copied all over the rich world. In the late 20th century the model was challenged by a wave of discounters, and they then in turn by the internet. What happens is that the profit going to the profiteers is more or less quickly undermined by outward-shifting supply. The original accumulation dissipates. The economist William Nordhaus has calculated that the inventors and entrepreneurs nowadays earn in profit only 2 percent of the social value of their inventions. If you are Sam Walton the 2 percent gives you personally a great deal of money from introducing bar codes into stocking of supermarket shelves. But 98 percent at the cost of 2 percent is nonetheless a pretty good deal for the rest of us. The gain from macadamized roads or vulcanized rubber, then modern universities, structural concrete, and the airplane, has enriched even the poorest among us.

Deirdre N. McCloskey, “How Piketty Misses the Point”, Cato Policy Report, 2015-07.

August 7, 2017

QotD: Communism, competition, and the socialist calculation problem

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

Competition turns out not to be so wasteful; it makes a system resilient. That misunderstanding was a symptom of a larger issue called the socialist calculation problem. We think of prices largely in reference to ourselves, or other individuals, which is to say that we mostly see them as the highest barrier to getting something we want. But as we pull back to look at society, or the globe, we see that they are in fact an incredibly elegant way to allocate scarce resources.

This was best explained by Friedrich Hayek in his essay “The Use of Knowledge in Society.” Some good like tin becomes scarce, perhaps because a large tin mine has failed, or perhaps because there is a new and very profitable use for tin that is soaking up much of the supply. The price rises, and all over the world, people begin to economize on tin. Most of them have no idea why the price of tin is rising, and if they did, they wouldn’t care; they just switch to another metal, or start recycling old tin, finding a way to bring global demand closer in line to global supply. A lot of that is possible only because of price competition.

You can think of this as something like a distributed computer network: You get millions of people devoting some portion of their effort to aligning consumption with production. This system is constantly churning, making billions of decisions a day. Communism tried to replace this with a bunch of guys sitting around in offices, who occasionally negotiated with guys sitting around in other offices. It was a doomed effort from the start. Don’t get me wrong; the incentive problems were real and large. But even if they could have been solved, the calculation problem would have remained. And the more complex an economy you are trying to manage, the worse a job you will do.

The socialist calculation problem is not fundamentally an issue of calculating how to produce the most stuff, but of calculating what should be produced. Computers can’t solve that, at least until they develop sufficient intelligence that they’ll probably render the issue moot by ordering our toasters to kill us so that they can use our bodies for mulch.

Megan McArdle, “Yes, Computers Have Improved. No, Communism Hasn’t”, Bloomberg View, 2015-09-02.

July 12, 2017

The real newspaper problem is not Facebook and Google … it’s their monopolistic heritage

Filed under: Business, History, Law, Media, USA — Tags: , , , , — Nicholas @ 03:00

Tim Worstall argues against allowing US newspapers to have an anti-trust exemption to fight Facebook and Google:

The first thing to note is the influence of geography and transport. By definition a newspaper needs to arrive daily — in physical format least — meaning that there’s a useful radius around a printing plant which can be served. What then happened is exactly what is happening with Google and Facebook, network effects come into play. Each urban area effectively became the monopoly of just the one newspaper. Sure, there were more than that in New York City for example, SF supported two majors later than many other places. But even in such large and rich places we did really only ever end up with one “serious” newspaper.

The network effects stem from the revenue sources. Roughly speaking, you understand, one third came from subscription revenues, one third from display advertising and one third from classifieds. Classifieds are a classic case of said network effects. Everyone advertises where they know everyone reads. Everyone reads the ads where they know everyone advertises those used baby bassinets. Whoever can get ahead in the collection of either then almost always wins the race. Classifieds are also hugely, vastly, profitable.

The way that American newspapers are sold, on subscriptions with a local paper boy, also contains elements of such network effects.

The effect of this economic structure was that each major urban area really had the one monopolist newspaper. This is where that famed “objectivity” comes from too. If there’s going to be the one newspaper then it’s going to try to make sure there’s no room for another by steadily occupying the middle ground on anything and everything. This is just the Hotelling problem all over again. Swing too viciously left or right (on any issue, political, social, whatever) and there might be room for someone to sneak in from the borderlands. Thus the very milquetoast indeed political views at most of these newspapers.

[…]

And that, I insist, is what is really happening to US newspapers. Most certainly, their problems stem from the internet. for the internet broke that monopoly imposed by economic geography and all else stems from that. They got fat and happy within those monopolistic areas and their pain is coming from the adjustments necessary to deal with that. The likely outcome I would expect to be many fewer first line newspapers staffed by many fewer people in much the way that the UK market has worked for near a century now. I would also expect to see them using political stance as a differentiator just as in Britain.

July 6, 2017

Words & Numbers: Let Amazon Play Monopoly

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

Published on 5 Jul 2017

Amazon’s offer to buy Whole Foods for $13.7 billion sounds pretty great to both parties, but it seems that isn’t good enough. The proposal has a lot of people worried about Amazon becoming an indestructible monopoly, and the government is all too happy to step in and settle the issue. But this concern ignores consumers’ own preferences as well as business and entrepreneurial history. This week in Words and Numbers, Antony Davies and James R. Harrigan discuss the probable future of the Amazon-Whole Foods merger, what it could mean for us, and what it could mean for another once-equally feared corporation: Wal-Mart.

June 30, 2017

“No one is bending over backwards to be fair to McEnroe here, and — well, he is John McEnroe”

Filed under: Media, Sports — Tags: , , — Nicholas @ 03:00

Colby Cosh on the tempest-in-a-teapot over John McEnroe’s rating of Serena Williams’ tennis skills:

McEnroe is in a familiar, mostly consequence-free sort of trouble for an interview he gave to National Public Radio that aired this past Sunday. McEnroe is flogging a book, and NPR’s Lulu Garcia-Navarro read a quote from it, asking him why he had described Serena Williams as “the best female player” ever. Maybe, Garcia-Navarro suggested, Serena is just “the best player in the world.” “Why say female player?”

McEnroe immediately answered that if Williams played tennis on the men’s tour “she’d be, like, (number) 700 in the world.” He added that “That doesn’t mean I don’t think Serena is an incredible player: I do.” He specified that “700” was not an exact guess — “perhaps it’d be a little higher, perhaps it’d be a little lower.” And he noted that Williams’s supreme mental rigour would enable unexpected victories over male pros.

[…]

It so happens that when Serena was 16 and participating in the 1998 Australian Open, she and her sister Venus boasted that they could probably beat the 200th-best men’s player in the world. A German named Karsten Braasch, once number 38 in the men’s ranking, but by then a bit dissipated, stood 203rd at that moment. He got word of the Williams challenge. Indulging in his trademark habit of smoking cigarettes during breaks in play, Braasch beat Serena 6-1 and Venus 6-2.

The sisters revised their claim to superiority over men outside the top 350 before deciding not to speak of the match again, nor to repeat it with a different male opponent. Braasch was quoted as saying “500 and above: no chance.”

It might be objected that Serena was “only” 16 at the time, assuming anyone had dared to mention Karsten Braasch at all this week, but female tennis players seem to experience pretty much the earliest chronological peak of playing ability outside gymnastics or thoroughbred horseracing. Being 35 years old, as Serena is now, doesn’t help anybody win in a sport involving strength and speed. McEnroe has clear justification for his belief that Serena would not be one of the 500 best players in a world of wide-open, all-genders tennis.

Megan McArdle agrees it takes nothing at all away from Serena Williams to say she’s not the best tennis player in the world:

“Best” is a relative value of course, not an absolute; Tyrannosaurus rex was one of the best in its field, 65 million years ago, but when conditions changed, poor T. rex went from industry leader to the ash heap of history. When we say that someone or something is “the best,” we always have to acknowledge that this judgment is highly dependent on the criteria we’re using to define excellence.

This is approximately the argument many of McEnroe’s critics seem to be making. Unable to refute his core point — that Serena Williams could not be a world champion if she were regularly competing against men — instead they’re asking why he would make that the standard for judging whether she’s the world’s best tennis player.

This leaves me just as confused as McEnroe was when the NPR interviewer asked him essentially the same question. Tennis, after all, is a court, a moderate amount of equipment, and some highly detailed rules for determining who wins. The best tennis player is the person who can most regularly defeat the other players under those rules. Unless some sort of terrible plague wipes out hundreds of top men’s tennis players, that person will never be Serena Williams.

[…]

We should all applaud Serena Williams for becoming the world’s best female tennis player. That’s a stunning achievement — a testament to her physical gifts and how hard she has worked to develop as a player. Williams has earned her titles, her money and her fame, and she deserves to bask in all of it. It is a compliment, and a true statement, to call her the best female tennis player. We won’t add anything to her achievement by subtracting “female” and turning the true accolade into false flattery.

June 28, 2017

QotD: How “Jim Crow” laws were brought in to suppress competition

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

Lebergott’s historical account – which reinforces the important findings of Robert Higgs about the postbellum economic trajectory of blacks in America – reveals the equalizing powers of economic competition. Contrary to popular myth, even racist southerners put their own economic well-being ahead of their irrational prejudices by competing with offers of higher wages for blacks’ labor and with offers of low prices for blacks’ business. This competition, in turn, increased blacks’ geographic and economic mobility and raised their incomes. The reason southerners – whether racists or rent-seekers (or both) – turned to government to get Jim Crow legislation is that market forces were undermining their racist preferences and competing away their uncompetitively high profits, rents, and wages.

Lebergott’s account also further reveals the utter implausibly of the claims of those who assert that today’s market in America for low-skilled workers is infected with monopsony power. While this market isn’t textbook perfect (no real-world market is), and while this market would be improved by making it even freer (for example, by eliminating occupational-licensing statutes and zoning restrictions), the ability of low-skilled workers today throughout the U.S. to move from job to job is surely better than was the ability of low-skilled blacks 150 years ago throughout the American south to move from job to job. And yet, as Lebergott documents, low-skilled American blacks of 150 years ago in the American south did indeed enjoy such mobility that economic competition raised their wages. Similarly, the ability today of entrepreneurs and business owners to discover and compete for under-priced labor is surely greater than was the ability of employers 150 years ago to do the same – and yet, again as Lebergott documents, such competitive initiative by employers was common 150 years ago and served to increase low-skilled workers’ mobility and wages.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2017-05-22.

June 20, 2017

“Licensing … is now one of the biggest labor problems facing California”

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

In the Orange County Register, Dick Carpenter outlines how many jobs in California are now closed off to anyone who doesn’t have a license:

Whether it’s brick-and-mortar restaurants fighting to outlaw food trucks, or taxicab associations suing Uber and Lyft, examples abound for this type of anticompetitive lobbying. One of the more blatant instances comes courtesy of the California Landscape Contractors Association. In 2014, the association supported a bill that made it even easier for regulators to crack down on contractors operating without a license. Their stated reasons were revealing: “Unlicensed persons unfairly compete,” because they can “significantly undercut licensed contractors when pricing projects to consumers.” The cost of compliance is quite substantial, as it “typically adds 15 to 20 percent to the cost,” the association estimated. Not only does licensure jack up consumer prices, it also keeps out aspiring entrepreneurs who ask for nothing more than the opportunity to work hard and prove themselves by the sweat of their brow.

Licensing goes well beyond contractors and is now one of the biggest labor problems facing California. In the 1950s, about 5 percent of Americans needed a government-issued license to work. Back then, government-mandated licensing was limited to a handful of trades, such as medicine and the law. But over the years, bottleneckers — often through self-serving professional associations — successfully persuaded governments to adopt new licenses that are difficult or practically impossible to obtain. This restricts opportunities for would-be entrepreneurs trying to break into the marketplace and provide new or better services.

Today, more than one-fifth of California’s workforce is licensed. When it comes to low- and middle-income occupations, which are often a gateway for upward mobility, California is the second-most extensively and onerously licensed state, according to a study by the Institute for Justice. In fact, there are so many licensing bottlenecks that when the bipartisan Little Hoover Commission began examining the issue, it reported that “No one could give the commission a list of all the licensed occupations in California.”

These restrictions are great for the bottleneckers, but they are bad for consumers. A report by the Brookings Institution summarized many of the academic findings on occupational licensing. Licensure can boost wages for licensed workers by as much as 15 percent, while increasing the cost for consumers by anywhere from four to 33 percent. As a result, one study even estimates that pervasive licensing leads to “up to 2.85 million fewer jobs nationwide, with an annual cost to consumers of $203 billion.”

Bottleneckers typically claim the costs of licensing are necessary to protect the public, but the reality is quite different. In California, barbers, cosmetologists, tree trimmers and many construction contractors all must complete far more training for their licenses than is required for emergency medical technicians — who hold people’s lives in their hands. Manicurists need 400 hours of coursework and training for their licenses, which can costs thousands of dollars; EMTs require less than half the amount of training at only a 160 hours.

The introduction of licensing to a previously unregulated field typically benefits the existing workers in that field and severely disadvantages anyone hoping to enter that field — existing workers and businesses restrict competition by keeping out new entrants, and create an artificial shortage which allows them to boost their prices. The consumer generally does not benefit in any measurable way from the introduction of licensing, and ends up paying more for the services offered.

April 6, 2017

QotD: The “real” “synergies” of corporate mergers

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

There can be a few factors behind consolidation. For example, massive economies of scale. Or … well, I’m afraid this is a bit delicate, but I can’t let it go unmentioned: Industries consolidate to reduce the number of players in the market, giving the remaining players more pricing power. Antitrust regulators tend to put on their big frowny face if companies cite the latter reason, so the public statements made by companies in consolidating industries tend to focus on more superficially attractive reasons like cost savings and “broader industry reach,” or more ethereally vague words like “synergies.”

True to form, Anthem is claiming that nearly $2 billion in synergy savings will be realized by the merged entities. This is probably true, to some extent. But you should keep in mind that mergers are themselves extremely costly. And I don’t just mean the fabulous fees that investment bankers and consultants collect to facilitate them. Joining two entities into one is really difficult: Corporate cultures clash, turf wars damage morale and profits, IT systems never do work right together, key employees leave, customers are alienated. So in general, these sorts of statements should be taken, not just with a grain of salt, but while sitting next to a salt lick with a big bag of Mr. Salty Pretzels and some cocktail peanuts to wash the whole thing down.

Megan McArdle, “No Wonder Insurers Want to Merge”, Bloomberg View, 2015-07-24.

January 5, 2017

Canada’s military-industrial complex

Filed under: Business, Cancon, Military — Tags: , , , , — Nicholas @ 04:00

Ted Campbell briefly outlines the three tiers of military logistics then discusses the most controversial tier, the national industrial base, in more detail:

Behind it all, unseen, misunderstood, unloved and, in fact, often actively disliked is the national defence industrial base.

There are a great many people, including many in uniform, who object to the cost ~ fiscal and political ~ of having a defence industrial base. Many people suggest that a free and open market should be sufficient to equip all friendly, and the neutral and even some not so friendly military forces.

They forget, first of all, that the defence industries of e.g. America, Britain, France, Germany and Israel are ALL heavily supported by their government and, equally, heavily regulated. It is not clear that we will always be in full political accord with those upon whom we rely for military hardware? What if one country wanted, just for example, to gain an advantage in a trade negotiation? Do you think they might not “decide” that since the government (a minister of the crown) has threatened to use military force against First Nations who protest against pipelines that they will not sell us certain much needed military hardware or licence its use in Canada?

It is always troubling when we see the costs of military hardware increase at double or even triple the general rate of inflation for, say, cars or TV sets or food and heating fuel, but that is not the fault of the Canadian defence industries … it is, in fact, the “fault” of too little competition in the global defence industry market: too few Australian, Brazilian Canadian and Danish defence producers, too many aerospace and defence contractors merged into too few conglomerates that control too much of the market. A robust Canadian defence industrial base, supported by extensive government R&D programmes and by a steady stream of Canadian contracts would help Canada and our allies.

[…]

I am opposed to government supported featherbedding by Canadian unions and companies but we do need to pay some price for having a functioning defence industrial base … the costs of our new warships, for example, are, without a doubt, higher than they would be if we had bought equivalent ships from certain foreign yards, but we need to be willing to pay some price for having Canadians yards that are ready and able to build modern warships when needed; ditto for aircraft, armoured vehicles, radio and electronics, rifles and machine guns, cargo trucks and boots and bullets and beans, too. AND, we need a government that will, aggressively, support that defence industrial base with well funded R&D programmes and by “selling” Canadian made military equipment around the world.

It’s one thing to accept that you’ll need to pay a premium over market cost for built-in-Canada equipment that can’t also be sold to other customers. What is disturbing is discovering that the premium can be up to 100% of the cost for equivalent non-domestic items. For example, this was reported in a CBC article in 2014:

Britain, for example, opted to build its four new naval supply ships much more cheaply, at the Daewoo shipyard in South Korea. The contract is for roughly $1.1 billion Cdn. That’s for all four. By contrast, Canada plans to build just two ships, in Vancouver, for $1.3 billion each. So Canada’s ships will be roughly five times more costly than the British ones.

But there’s a twist. Canada’s supply ships will also carry less fuel and other supplies, because they’ll be smaller — about 20,000 tonnes. The U.K. ships are nearly twice as big — 37,000 tonnes. Canadians will lay out a lot more cash for a lot less ship.

Everything is more expensive to build domestically if you don’t already have a competitive market for that item. The federal government’s long-standing habit of drawing out the procurement process makes the situation worse, as the costs increase over time (but the budget generally does not), so we end up with fewer ships, planes, tanks or other military hardware items that arrive much later than originally planned.

November 14, 2016

QotD: The relationship between unions and occupational licensing

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

… this is also known as “licensure”. And the rate in the 50s, at that peak of union power, was around 5% of workers needed such a licence to go to work. And union membership was, at that peak, 35% and is now around 10% or a little above, and licensure has gone from 5% to 30%.

For my point to work we have to consider unionisation and licensure as being the same thing. And they’re obviously not exactly the same thing. But they are sorta, kinda, the same thing. For all the claims that the requirement for a licence is in order to protect consumers (a theory for which the technical economic term is “codswallop”) it’s really a way to protect the wages of the ingroup against competition. As, of course, is being in a union a method of protecting those economic interests of the ingroup.

Actually, licensure is most akin to the medieval and early modern guilds system, out of which the union movement itself grew. So it’s really not surprising at all that they share certain attributes. That aim and desire of protecting the incomes of members of the group against the economic interests of everyone else.

So, my argument is that we’ve not in fact had a fall in the power of organised labour over these recent decades. We’ve just seen a change in the form of it, from unionisation to licensure. The point being that this is absolutely and definitely true in part and may or may not be true entirely. I tend towards the entirely end of that spectrum and I’d be absolutely fascinated to see if there’s been any academic comparisons made of the strengths of the two systems in protecting workers’ wages and conditions. I’d even be willing to believe that licensure works better than unionisation, given that the first is a conspiracy against the consumer, something easier to carry off than the unions’ conspiracy against the employer.

Tim Worstall, “More Union Power Won’t Raise Wages Or Reduce Inequality”, Forbes, 2015-03-07.

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