Quotulatiousness

July 10, 2012

American exceptionalism, especially in taxation

Filed under: Business, Government, Liberty, USA — Tags: , , — Nicholas @ 10:19

Mark Steyn on the unique American perspective on taxes:

Elsewhere in the world, there are two generally accepted bases for taxation: residency and source of income. Most countries tax you if you live within their borders, some tax you if you live elsewhere but earn money within their jurisdiction, but only America claims the right to tax you simply for being American — even if you, say, live in Belgium but drive over the border to work in Luxembourg every day. This is unique to the United States: Spain taxes you if you’re a resident of Spain; Slovenia taxes you if you’re a resident of Slovenia; but America taxes you if you’re an American who’s working as a teacher in Gabon. You’re at permanent risk of double taxation, and the fines for minor and accidental infraction are arbitrary and confiscatory.

As I say, no other developed country does this — although Eritrea does.

On January 1st 2013, all this gets worse. The FATCAT act (technically, it’s FATCA, but we all get the acronymic message) makes it not worth a foreign bank’s while to do business with Americans. I don’t just mean Mitt Romney’s chums in the Cayman Islands, but an American of modest means on a two-year secondment to Hong Kong requiring a small checking account with which to pay local utility bills — or a small businessman attempting to expand his distribution in Canada.

Maybe you don’t care about these people: Why can’t the business guy expand his business in Michigan or Idaho like true-blue Americans would do, etc? But at a time when America is ever more mortgaged to foreigners, making it more difficult for Americans to go out and earn money from the rest of the planet doesn’t seem a smart move. Unless you’re planning on making U.S. citizenship a combination food-stamp card. American exceptionalism and American isolationism are not the same thing.

More to the point, the 2008 “exit tax”, the existing foreign bank-account disclosure paperwork, the new FATCAT act, and even the recent habit of publishing the names of those who renounce citizenship are simply inappropriate in a free society.

July 9, 2012

The constipated British housing market

Filed under: Britain, Bureaucracy, Business, Economics, Government — Tags: , , — Nicholas @ 09:33

Tim Harford’s weekend column on the state of Britain’s housing market and a possible solution to the disconnect between supply and demand:

The chief obstacle to house building in the UK is the planning system, which, 65 years ago, did away with the idea that if you owned land, you could build on it, and replaced it with a system where planning permission was required. Permission to build houses is severely rationed, and such rationing can be seen clearly in the gap between the value of agricultural land without planning permission (a few thousand pounds a hectare) and the value of such land once permission has been granted (a few million).

The difficulty is that local authorities have the ability to grant planning permission but have little incentive to do so, because it tends to be unpopular with existing voters. The huge windfall from winning planning permission falls to whoever has managed to speculate on land and navigate the tangle of planning rules. These serve as nice barriers to entry for existing developers, while driving up the price of building land and so driving down the size of new homes.

Tim Leunig, chief economist at CentreForum, a think-tank, has proposed a two-part system of land auctions to get around this problem. Local authorities would buy land at auction, grant planning permission on it and then sell the land on to developers — with some strings attached, if they so choose. The profits would be enormous, and enjoyed by existing residents in the form of lower taxes or better public services. This isn’t the only way to liberalise planning, but it retains local control and democratic accountability — while dramatically increasing the incentive to develop.

Restoring a free market right to build on property you own would also be a fast solution to the diminished housing supply, but when have governments at any level willingly given up power?

July 7, 2012

Tim Worstall: the software patent system is FUBAR’ed

Filed under: Business, Law, Technology — Tags: , , , , , , — Nicholas @ 11:05

In Forbes, Tim Worstall explains the odd situation of Amazon trying to obtain patents to use defensively when (not if) they get sued for entering the smartphone market:

… Amazon isn’t searching out patents which would allow it to build phones to, say, the GSM or CDMA standards. For those patents, by virtue of being included in those standards, must be made available to all comers on reasonable and non-discriminatory terms (RAND, or Europeans add “Fair” to the beginning to give FRAND). So any patent that is actually necessary to make a phone that interacts with the network is already available to them on exactly the same terms that Samsung, Apple, Nokia or anyone else pays for them.

No, what Amazon is looking for is just some bundle of patents, somewhere, that have something to do with mobile telephony. So that when (and sadly, it really is when, not if) they get sued by someone or other for breaching a patent then they’ve got some great big bundle of documents that they can wave back at them. Such patents can range from the possibly valid (slide to unlock perhaps) through to two that really irk me: Apple claiming a patent on a wedge shaped notebook and, unbelievably to me, on the layout of icons on the Galaxy Tablet in Europe.

I take this to be evidence that the technology patent system has simply got out of hand: that the system is entirely Fubar in fact. We need to recall what a patent is supposed to do: it is not that intellectual property is some God given right. Rather, we realise that given that ideas and technologies are public goods it is very difficult to make money out of having invented them. Thus we artificially create intellectual property in the form of patents and trademarks. But we are always walking a narrow line between encouraging invention by awarding such rights and discouraging derivative inventions by awarding rights that are too strong.

July 5, 2012

What do software developers and predatory bankers have in common?

Filed under: Business, Technology — Tags: , , , , , — Nicholas @ 09:02

In his regular column at The Register, Matt Asay points out that using another company’s API can be a quick and easy way to get going, but it carries significant risks:

In tech today, it has become a truism that “if you’re not paying for it, you’re the product”. Somehow we have applied this wisdom to consumers without recognising that the same principle applies to enterprises and their developers. Recently, however, Netflix and LinkedIn have reminded us just how precarious it is to build on someone else’s platform — or API.

Paul Graham, one of the founders of Y Combinator, has described APIs as “self-serve [business development]”. It’s a great story: open and document your API and watch a thousand businesses bloom, bringing you cash and legitimacy. All of which may be true, if done correctly.

But the other side of Graham’s “business development” is the difficulty of predicting the business planning on the other side of the API. Twitter was pretty free with API access in its early days when it was seeking adoption rather than income. Now that the company has grown up and continues to tighten its grip on how and where users interact with tweets, Twitter terminated its tweet syndication partnership with LinkedIn and has promised to clamp down even more tightly on how developers use its API. Twitter is doing this because it can, as professor Joel West points out, but also because it must: its advertising business depends upon it.

So where’s the banking similarity come in?

There’s one other thing to consider, as venture capitalist Bill Davidow opines in The Atlantic, and that is the very real possibility that this API mercantilism is a sign of how the technology world is changing, and not for the better:

    At both Hewlett-Packard and Intel, where I next worked, money was important — but it wasn’t the top priority. The goal was to do the right thing and do it well. If you did that, over time, rewards followed and shareholders supported your efforts…

    Many other things have changed in the valley over the past five decades. I’ve become increasingly concerned about one thing that is seldom discussed: the valley is no longer as concerned about serving the customer, and even sees great opportunity in exploitation. We are beginning to act like the bankers who sold subprime mortgages to naïve consumers…

Or sold developers subprime APIs?

July 2, 2012

Hoist a craft-brewed beer to thank Jimmy Carter for saving America’s brewing tradition

Filed under: Business, Government, History, USA — Tags: , , , , — Nicholas @ 10:35

Jimmy Carter will have to go a long time before his reputation recovers from his four years in office, but along with beginning to deregulate the air travel, freight railroad, and trucking industries, he also deserves credit for triggering the revival of the American craft brewing tradition. This is from an article in The New Republic, published in 2010:

If you’re a fan of craft beer and microbreweries as opposed to say Bud Light or Coors, you should say a little thank you to Jimmy Carter. Carter could very well be the hero of International Beer Day.

To make a long story short, prohibition led to the dismantling of many small breweries around the nation. When prohibition was lifted, government tightly regulated the market, and small scale producers were essentially shut out of the beer market altogether. Regulations imposed at the time greatly benefited the large beer makers. In 1979, Carter deregulated the beer industry, opening back up to craft brewers. As the chart below illustrates, this had a really amazing effect on the beer industry:

H/T to The Whited Sepulchre for the link.

July 1, 2012

The Royal Navy’s successful privatization effort

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

Even the most dogmatic libertarian would be hard-pressed to defend the notion of privatizing the fighting navy, but the rest of the navy (training, support, maintenance, etc.) can in some instances be privatized not only without impacting military efficiency, but actually boosting it:

The Royal Maritime Auxiliary Service (RMAS) was privatised and taken over by Serco back in the 1990s and run for profit. To this day, Serco Denholm are responsible for the provision of all manner of auxiliary services, ranging from tugs and tender transfers, through to torpedo recovery craft, exercise minelayers and range target vessels.

All in all, there are easily over 100 vessels which can be found primarily in naval bases, but also in other establishments such as the Kyle of Lochalsh, around the UK. This fleet of vessels is an important reason to be positive for two reasons. Firstly, many navies rely on their own personnel to man and operate these vessels. When they need replacing, these costs are funded from naval budgets, and not from a wider contract fund. Similarly, the manpower needed to operate them comes from the Navy, and not from the private sector, meaning more sailors are needed to do this sort of job, and not go to sea on a ‘proper’ military vessel. By contracting out the service, the RN is able to focus its resources and manpower on proper military vessels, and not have to worry about finding funds to replace elderly tugs, at a time when it wants to bring frigates into service. It is not remotely glamorous, but it is an essential part of operating a Navy, and one that is often forgotten.

Also forgotten is just how new this fleet is — there has been a huge amount of investment in the port services fleet in recent years, with literally dozens of craft (Humphrey read something saying over 80 new vessels were being ordered) being built and entering service. The RN has managed to acquire the services of one of the most modern and effective port support vessels fleets in the world. This would not have happened if the RN were still looking after the RMAS — instead, by privatising it, the funding instead has brought new ships and better capabilities into service, at a reduced cost to the taxpayer. This matters because without it, the RN would be reliant on ever older ships, or finding scarce equipment programme funds to pay for them. (For those interested in the ships in service now, try this link — http://www.rfanostalgia.org/gallery3/index.php/RMAS)

June 29, 2012

From Maoism to Kleptocracy in one generation

Filed under: Business, China, Economics, Government — Tags: , , , — Nicholas @ 08:14

China’s economic growth has been one of the wonders of the modern world, as one of the poorest nations has pulled itself well up the economic tables over just the last twenty years. What it has not done, however, is replace the communist leadership with democratically elected leaders. What has happened is that switching from a pure command economy to a freer economy has created fantastic opportunities for graft and corruption. Opportunities which have been grasped eagerly by party leaders and their friends and family:

As I set out in The Fall of the Communist Dynasty, and a HT to John Hempton’s piece within which he contends that the entire Chinese economy is a Kleptocracy , this week we have news from Citron Research who reports that Evergrande Real Estate Group Ltd is ‘a deception on a grande scale’ .

Citron quote ;-

‘Evergrande who ranks among the top 5 Chinese property companies. Our analysis and primary research reveal that: 1] Evergrande is insolvent; and 2] Evergrande will be severely challenged from a liquidity perspective. The Company’s management has applied at least 6 accounting shenanigans to mask Evergrande’s insolvency. Our research indicates that a total write-­down of RMB 71bn is required and Evergrande’s pro forma equity is negative 36bn.’

What sparked Citrons interest in Evergrande was the mail order doctorate the chairman claimed from the University of West Alabama, a small college 230 miles north of New Orleans with 2300 on-campus students. Evergrande’s is one of the top 5 players in the Chinese property market that fell for its 8th consecutive month in May. My experience with these types of matters is that small things can be excellent markers to greater problems. Small examples of dishonesty in one area of life are often reflected in larger undiscovered examples in other areas of a person’s life.

[. . .]

Zoomlion has an interesting business model, it is similar in many of ways to Caterpillar, except whereas Caterpillar report falling sales, Zoomlion reports astounding sales growth with a fivefold increase in revenue since 2007. Zoomlion customers sometimes buy ten concrete mixers when they planned to initially by one or two. They have a perverse incentive to buy more than they need because these concrete trucks are purchased via finance packages supplied by Zoomlion.

Then the machines can be garaged and used as collateral to borrow further funds from other lenders. Zoomlion continues to grow while cement sales have plunged. In May, cement output increased 4.3 per cent YoY, down from 19.2 per cent recorded last year. Zoomlion’s new debt of $22.5B buys roughly 900,000 trucks which could produce enough concrete (at six loads a day) to build over thirty Great Pyramids of Giza a day.

[. . .]

All revolutions have class and economic matters at their core. Ironically, the difference in a future Chinese collapse is that the expropriators in China in this cycle have been the Communist Party political class. The CCP have become the Kleptopreneur bourgeoisie who have expropriated from China’s proletariat (the industrial working class), via corruption and theft from the state and state owned enterprises. The Ka-Ching Dynasty is responsible for the greatest looting of a nation in history.

Marx wrote that modern bourgeois society (Capitalism) has conjured up such gigantic means of production and of exchange, that it is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells (Karl Marx)

The CCP ‘sorcerers’ have summoned up a political and economic nether world that is so systemically corrupted it is in the process of spiralling into same revolutionary physics that destroyed the original Chinese merchant bourgeoisie that Mao overthrew.

Earlier posts on China’s economy are here. H/T to Cory Doctorow for the link.

June 19, 2012

Big business loves regulation: it keeps competition at bay

Filed under: Business, Economics, Government — Tags: , , , , — Nicholas @ 08:04

Jan Boucek at the Adam Smith Institute blog, with a couple of examples of big business welcoming additional government intervention in their markets:

First out of the trap was Barclays CEO Bob Diamond. In an interview Wednesday with Bloomberg, he reprised his long-standing mantra that “strong banks, like Barclays, want strong regulation.”

This sounds good in our current age of finger-pointing and bank-bashing but serves Barclays well if high barriers to entry keep out more competition from Diamond’s industry.

Then in an interview Friday with The Financial Times, the outgoing head of retail at Royal Bank of Scotland Brian Hartzer suggested regulators should forcibly end free current accounts. He smoothly phrased it in terms that chime with today’s sentiment: “Regulatory intervention might be helpful in forcing banks to the table” and “A large proportion of customers are being cross subsidised — we think that’s unfair.”

Of course, what Hartzer proposes means banks no longer having to compete on price for their most basic product.

Both these sweetly melodious proposals for more regulation need to be treated with Adam Smith’s “most scrupulous” and “most suspicious attention” because they’re music to the ears of our discordant political maestros.

The closer big business and government become, the stricter the regulations against individuals and firms trying to compete with the big businesses. Small firms are almost always disproportionally impacted by industry-wide regulations (and that’s by design), which makes them less able to compete with the established firms. Regulators are more help to big companies than clever advertising, innovative product development, or good customer relations.

June 13, 2012

When is a bribe appropriate?

Filed under: Britain, Bureaucracy, Business, Law, Russia — Tags: , , , , — Nicholas @ 09:59

The British government is trying to crack down on bribery, which on the surface seems like a good thing to do: but will it cripple British businesses in third world countries?

We used to draw a distinct line between what was acceptable business conduct here at home and what we did abroad with Johnny Foreigner.

Inviting Bertie from your major customer to Henley or the Derby, or waving Cup Final and Olympic tickets in his face was entirely acceptable. Slipping him £500 for an order was bribery and both illegal and immoral.

But what you did abroad was an entirely different matter: bribery was until very recently tax deductible.

[. . .]

This is of course very different from the system of old. Which was, essentially, that soft soaping someone with experiences and days out was just absolutely fine while any mention at all of cash was not just legally but also socially verboten.

At home, in Britain, that was. Having worked in some pretty odd and even rough places I’ve done my share of bribing people, but even so I would be profoundly shocked if I was asked for a bung in Blighty. But the system also most definitely facilitated the payment of bribes to Johnny Foreigner.

At one point, working in Russia, I needed to get cheap railway prices out of the Russian railroads to make the numbers on a metals shipment add up. The only way known to do this was to make a deal with the North Koreans who had special state-set prices on said railways. Which is how I found myself inside the N. Korean embassy in Moscow handing over $10,000 in crisp notes to their KGB-style guy after the successful conclusion of the shipment.

Yes, of course, it’s terribly naughty subverting the employees of a communist dictatorship, but the reaction here at home was the most interesting. When I made gentle enquiries to the taxman as to how I might account for this transaction, hinting gently at first, he finally pointed out that since I’d paid the bribe in a foreign currency to a foreign chap that was just fine. Just list it as a business expense and it was tax deductible.

April 29, 2012

Do you read the daily stock market commentaries? Don’t bother

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

I don’t mean the ups-and-downs of the market … if you’re invested in the market, it behooves you to pay a bit of attention now and again. No, what I mean are the interpretations of what’s happening in the market and what is or isn’t driving it. Canadian Couch Potato has a good summary:

I remembered the joke this morning when I read the Financial Post’s daily market commentary: “The S&P 500 added more than 2% in the two previous sessions as immediate concerns over rising yields in Spain and Italy ebbed and on bets the Chinese GDP data would surprise on the upside.”

This commentary can sound so knowledgeable and wise. But to suggest that daily market movements can be explained in such simple cause-and-effect terms is laughable. If you want proof, all you need to do is read the commentary every day. You’ll just as often see statements like this: “The S&P 500 shed more than 2% in the two previous sessions despite immediate concerns over…”

It can’t work both ways: either these events affect daily stock prices, or they don’t. Once you accept this, you realize that commentary linking the S&P 500 to surprising Chinese GDP data sounds a lot like the joke about Katarina Witt and Billy Martin.

Here’s my own version of the daily market report: “The S&P 500 added more than 2% during the last two sessions because of an incredibly complex and largely random combination of factors that cannot possibly be distilled into one sentence. Analysts expect gains to continue during the second quarter, but since this already priced into the markets, no one should give a fiddler’s fart what they think. Meanwhile, money managers have released their forecasts for the year, which will be widely read and acted upon, despite the fact that their previous forecasts were dead wrong. Tune in tomorrow for more of the same. In the meantime, stick to your long-term plan.”

H/T to Terence Corcoran for the link.

April 28, 2012

Charles Stross analyzes the economic and technical arguments for removing DRM on ebooks

Filed under: Books, Business, Economics, Media — Tags: , , , — Nicholas @ 00:08

A post at Charles Stross’s blog from earlier this week, when Macmillan announced that they were removing DRM from their ebook lines:

After I recommended that the major publishers drop mandatory DRM from their ebook products, I realized that my essay had elided a bunch of steps in my thinking, and needed to reconsider some points. Then I realized that it’s not a simple, straightforward argument to make. Consequently, I ended up writing another essay, although I’ve tried to summarize my conclusions below.

First, my conclusions:

1. The rapid current pace of change in the electronic publishing sector is driven by the consumer electronics and internet industry. It’s impossible to make long term publishing plans (3-10 years) without understanding these other industries and the priorities of their players. It is important to note that the CE industry relies on selling consumers new gadgets every 1-3 years. And it is through their gadgets that readers experience the books we sell them. Where is the CE industry taking us?

2. Dropping DRM across all of Macmillans products will not have immediate, global, positive effects on revenue in the same way that introducing the agency model did …

3. However, relaxing the requirement for DRM across some of Macmillans brands will have very positive public relations consequences among certain customer demographics, notably genre readers who buy large numbers of books (and who, while a minority in absolute numbers, are a disproportionate source of support for the midlist).

4. Longer term, removing the requirement for DRM will lower the barrier to entry in ebook retail, allowing smaller retailers (such as Powells) to compete effectively with the current major incumbents. This will encourage diversity in the retail sector, force the current incumbents to interoperate with other supply sources (or face an exodus of consumers), and undermine the tendency towards oligopoly. This will, in the long term, undermine the leverage the large vendors currently have in negotiating discount terms with publishers while improving the state of midlist sales.

Now the details:

April 15, 2012

Implying a link between Walmart stores and hate groups

Filed under: Business, Politics, USA — Tags: , , — Nicholas @ 11:53

This is custom-made for drawing lazy conclusions:

Study Says The More Walmarts In The Area, The More Hate Groups There Are

This one’s sure to boil some blood over at Walmart headquarters: A new study says there’s a significant correlation between the amount of Walmart stores in an area and the number of hate groups existing in that same area. As the big-box stores proliferate, so do the groups.

LiveScience.com cites the study by professors at Penn State University, New Mexico State University and Michigan State University, which says that the amount of Wal-Mart stores in a county was more statistically significant than other factors usually associated with hate group participation. For example, the unemployment rate, high crime rates and low education.

As I’m just as lazy as the others who’ll jump on that eye-catching headline, here’s another lazy conclusion: because Walmart locates their stores in areas with growing population, so Walmart stores will also correlate with any number of other phenomena that require a minimum (but increasing) population.

November 7, 2011

Occupy Winter Park!

Filed under: Business, Football, Government, Politics — Tags: , , — Nicholas @ 13:35

Minnesota is blessed with some particularly colourful legislators, but all of them must take second place to State Representative Phyllis Kahn. She has a long history of, shall we say, “imaginative” legislative proposals, and this one is a doozy:

Throw in one more idea for a new Minnesota Vikings stadium: Have the public buy shares in the team, enabling them to own a piece of the Vikings and help finance a stadium.

The community ownership idea has been floated before but Rep. Phyllis Kahn, DFL-Minneapolis, said Monday she would introduce legislation to require Gov. Mark Dayton and the Metropolitan Sports Facilities Commission to work with the National Football League to make it happen. The commission owns the downtown Minneapolis Metrodome, the team’s home for nearly 30 years.

“Dayton asked for all ideas to be put on the table and that’s exactly what I’m doing here,” said Kahn. “No single idea [for funding a new stadium] has gained enough traction to pass the Legislature.”

The Vikings are hoping to get a new stadium built, and the state legislature has been doing what they can to kick the issue down the road every time it’s come up. I don’t have a say in the matter, as I’m not located in Minnesota and I’d probably still cheer for the team even if it moved elsewhere (though it would be a sad thing to see it move after half a century in Minnesota).

In general, I don’t think governments should build stadiums for professional sports teams, as it’s using tax money to subsidize private profits. If a new stadium is going to generate a profit, the team’s ownership should bear the costs themselves. The fact that they generally don’t — mostly because politicians don’t want to deal with angry sports fans after the team leaves town — doesn’t make it right.

However, Rep. Kahn’s proposal won’t fly because the NFL itself forbids public ownership of teams (the grandfathered-in exception being the Green Bay Packers). What’s even more interesting about her plan is that the proceeds of selling shares in the team would be put directly towards building a new stadium:

The funds from selling stock in the Vikings, said Kahn, could go toward helping the team build a new stadium. She added that, under her plan, Vikings owner Zygi Wilf and his family could retain a 30 percent controlling interest in the team.

So the Wilfs will be allowed to retain a minority share, but wouldn’t be compensated for the proportion of the stock that was being sold? Isn’t that just expropriation? I didn’t realize the DFL was a modern-day successor to Mussolini’s Fascist Party.

June 26, 2011

How much did the salary cap change the NFL?

Filed under: Business, Football — Tags: , — Nicholas @ 13:14

If this analysis of the 1975 Minnesota Vikings roster by John Holler says anything, it shows that the biggest change in NFL history was probably the introduction of free agency and the salary cap:

Many players believe the 1975 Vikings were the greatest team in franchise history. But, in the free agency era, there would have been no chance they could have kept the team together. Fortunately for Vikings fans, those players were locked into contracts that didn’t allow them leave. But, what would the ’75 Vikings have cost in modern-day dollars? Too much. Consider the following:

Fran Tarkenton was nearing the end of his career, but had never missed a game and was viewed by many as the best quarterback in the NFL. Given the current wage paid the top QB, Tark could easily have been given $15 million or so.

Chuck Foreman would have been entering the third year of his rookie contract and, most likely, would have held out in order to get a better deal in the current era. The Vikings would acquiesce and he would sign a deal of about five years for $45 million, with $15 million or so up front. Current cap total about $30 million.

On the offensive line, Mick Tingelhoff would likely not be earning top dollar, but would still be worth about $3 million a year. Guard Ed White would likely be coming up for free agency himself and would probably cost another $5-6 million a year. Ron Yary, the first overall pick in the 1968 draft, would likely be in the second or third year of his second contract, which, given his five straight Pro Bowl appearances, would probably put him in the $12 million range. So far, five players would have the Vikings on the hook for about $50 million, without even touching the Purple People Eaters.

In short, free agency and the salary cap totally changed the economic side of the game, and ensured that more teams would be competitive over the long haul.

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