Quotulatiousness

October 31, 2018

Premier Ford’s promise to lower electricity rates in Ontario

Filed under: Business, Cancon, Government — Tags: , , , , — Nicholas @ 05:00

In the Financial Post, Lawrence Solomon says Doug Ford can’t risk abandoning his promises about Ontario electricity costs, despite his cabinet’s worries about provincial reputation damage:

Ford has every reason to return the power system to some semblance of economic sanity. Ontario is now burdened by some of the highest power rates of any jurisdiction in North America, throwing households into energy poverty and forcing industries to close shop or move to the U.S. The biggest reason by far for the power sector’s dysfunction is its renewables, which account for just seven per cent of Ontario’s electricity output but consume 40 per cent of the above-market fees consumers are forced to provide. Cancelling those contracts would lower residential rates by a whopping 24 per cent, making good on Ford’s promise to aid consumers.

[…]

To date, Ford has stopped renewable developments that haven’t been completed, which will prevent things from getting worse, but he has failed to tear up the egregious contracts of completed developments, which will prevent things from getting better. Based on conversations that I and others have had with government officials, it appears that Ford is inclined to cancel the contracts and honour his signature promise, but he is being thwarted by cabinet colleagues who fear that Ontario’s reputation will take a hit in the business community if they don’t play nice.

Except, there’s nothing nice about betraying a promise to the voters who democratically put you in power in order to avoid pressure from lobby groups who think governments are entitled to hand out sweetheart deals to their favoured cronies. There’s also nothing democratic about it. It is an axiom of parliamentary government that “no government can bind another.”

Canadian governments, including Ontario governments, have in the past torn up odious contracts, including those in the energy sector. When they did, upon passing binding legislation, they were able to reset the terms, offering as little or as much compensation as they wished. Outraged business lobbies’ claims that the reputation of governments would be affected were not borne out. Moreover, such rightings of political wrongs serve the interest of small government and free markets, because businesses have always understood that there’s an inherent risk in contracting with governments that are able to unilaterally rewrite contracts. To overcome that inherent risk, businesses add a risk premium when getting in bed with government, helping to explain the rich contracts the renewables developers demanded. That risk premium acts to make business-to-business dealings more economic than business-to-government dealings.

October 30, 2018

The plight of Gab

Filed under: Business, Law, Liberty, Media — Tags: , , — Nicholas @ 05:00

Unlike other social media platforms that have hosted (and continue to host) legal-but-“hateful” content, Gab has suffered a de-platforming and is currently scrambling to get the service operational with a new service provider (reported to be a non-US site). On Monday, the Gab team posted the following static page in place of their normal UI:

The Z Man explains:

The question that normal people ask is how this is possible. After all, these companies sign contracts and in theory, we still have courts where contracts can be enforced by impartial judges. While that is a laughable fiction now, the reality is these companies are not bound by standard business agreements. They have been allowed to carve out new law for themselves, forcing their vendors and customers to sign off on what is called an adhesion contract. This gives the tech giants absolute power over everyone else.

An adhesion contract or “standard form contract” is a contract drafted by one party and signed by another party. The second party typically does not have the power to negotiate or modify the terms of the contract. Adhesion contracts are commonly used for things like insurance or rental contracts. When you rent a car or purchase car insurance, you just sign the contract, because you have to in order to rent the car or get insured. Every technology service provider is now basing their relationships on these types of contracts.

It used to be that the courts carefully scrutinized these types of arrangements, so the contract had to adhere to some basic principles. The courts would often use the “doctrine of reasonable expectations” to void all or part of these contracts, when there was lack of notice, unequal bargaining power, or blatant and substantive unfairness. The reason for this should be obvious. When a powerful company has the right to dictate the terms of the contract to their customers, they have all the power in the contractual relationship.

In western jurisprudence, a valid contract is one in which both parties freely engage and have equal opportunities to negotiate. When one party imposes the conditions on the other, that’s not a contract. That’s slavery. In a world where a handful of people control the public space, these types of contract give them arbitrary power over public discourse. If they become vexed with what you say, they can claim you have violated their terms of service and remove you from the internet. Again, the terms are dictated, not negotiated.

October 29, 2018

The $15 Minimum Wage Is Turning Hard Workers Into Black Market Lawbreakers

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

ReasonTV
Published on 11 Oct 2018

An in-depth look at New York’s car wash industry, and the real world consequences of politicians interfering with a complex industry they don’t understand.

Reason is the planet’s leading source of news, politics, and culture from a libertarian perspective. Go to reason.com for a point of view you won’t get from legacy media and old left-right opinion magazines.

—————-

On March 4, 2015, a group of union leaders, activists, and elected officials were arrested for blocking traffic during a protest in front of a Vegas Auto Spa, a small car wash in Park Slope, Brooklyn. Chanting “No contract, no peace!” and “Si se puede!,” they had come in support of striking workers, who had walked out demanding a union contract after allegedly being subjected to dismal working conditions.

For David Mertz, the New York City director and a vice president at the Retail, Wholesale and Department Store Union (RWDSU), it was an inspirational moment in an ambitious six-year campaign to unionize the city’s car washes industry.

“These workers were willing to stand out there during one of the coldest winters … literally in decades to fight for their rights and for basic human dignity,” says Mertz, who was also arrested that day. “You have the ability to make change by coming together, and when you do that sometimes you find that you’ve got some friends on your side.”

In the past six years, the car wash industry, which employs low-skilled, mostly immigrant workers, has also been the target of lawsuits for alleged underpayment of wages, including a handful of cases spearheaded by the New York State Attorney General’s office. Working conditions in the industry were also cited as a raison d’être in the successful campaign to raise the state minimum wage to $15 per hour, which takes full effect at New York City car washes in January of 2019.

As Reason chronicled in a feature story in our July 2016 issue, the real world impact of the unionization drive, the lawsuits, and the $15 minimum wage has been mainly to push car washes to automate and to close down.

Two years later, there are more unintended consequences. The $15 minimum wage is fostering a growing black market—workers increasingly have no choice but to ply their trade out of illegal vans parked on the street, because the minimum wage has made it illegal for anyone to hire them at the market rate.

The minimum wage is also cartelizing the industry: Businesses that have chosen to automate are benefiting from the $15 wage floor because outlawing cheap labor makes it harder for new competitors to undercut them on price and service.

As a sequel to the 2016 article, this video takes an in-depth look at the real world consequences that result when politicians interfere with a complex industry they don’t understand, enabled by media coverage that rarely questions the overly simplistic tale of exploited workers in need of protection.

Written, shot, edited, and narrated by Jim Epstein.

October 27, 2018

The Progressive case for Americans to pay higher drug prices than the rest of the world

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

Tim Worstall carefully explains — in full compliance with Progressive philosophy and pointing out that Trump is wrong (which is extra bonus Progressive points) — why Americans should continue to pay more for drugs that are cheaper in other countries:

Working out which drugs work and how is expensive. There’s then another expensive in actually proving this well enough to gain a licence. All in costs are in the $1 to $2 billion range dependent upon who you want to listen to. Unfortunately, once you’ve done all that and paid all that anyone could just come along and copy your drug. Which means you don’t make your $2 billion back – that in turn meaning that no one does spend $2 billion, we don’t get new drugs and we all die in ditches.

This is a classic public goods problem and the solution we use – not the only one, not even the only viable one – is patents. You get about 10 years, the time between approval and patent expiry, to make your $2 billion back. Then anyone can copy it and we all get cheap copy drugs.

For this system to work it is not necessary that everyone pay these high patent protected prices. There’s no point in trying to charge some farm worker in S Africa $10,000 a year for HIV retrovirals anyway, they don’t have the cash and demanding it will gain nothing except their death. We just need some group to pay the high prices so that drug development still happens. Everyone else can get drugs at some margin above their manufacturing, not development, costs.

So, who is it who should be carrying this cost of producing this public good? Good progressive principles tell us that it should be the rich folk. Imagine that we used some other system of drug development, maybe taxpayers cough up for it all. It’ll still be the rich doing the paying, right? So, patents, where the rich pay full freight for drugs, the poor don’t, this meets our equity criterion.

And who are the rich in this global sense, for we’re talking about a global public good here? That would be the citizens of the richest large nation, the largest rich nation, the United States of America. So, yes, Americans should be paying high prices for drugs and the rest of us shouldn’t.

Do note that we’ve used impeccable redistributionist logic to reach this conclusion. It’s only if you think the rich shouldn’t be paying to benefit the poor that this is a bad idea. Which might be why Trump is agin it but it still puzzles as to why the progressives would be.

QotD: The gender pay-gap

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

If you mean the pay gap that exists between women, anybody with an ounce of statistical sense knows that it is insignificant when it comes to actual equivalent jobs with equivalent requirements. Once you factor in that women are statistically more likely to take time away from their careers for child rearing and factor that in, the pay difference is statistically insignificant. Unless you work in the Obama White House, because fuck you is why.

Men also tend to work more in dangerous or physically demanding jobs by choice, which also pay better. Nobody forces them to go into those fields. Men also get more STEM degrees and women get more LAS degrees. STEM pays better. Nobody is forcing these men to do math, but men and women are different. If you don’t understand why my accounting degree is more valuable that your gender studies degree, you don’t understand basic econ 101 and supply and demand. So yes, I would like fries with that.

If you mean the gender gap in voting between the parties, just about every psychological study ever conducted by somebody not huffing paint understands that women tend to make decisions more emotionally and men tend to make them more logically. I see you reaching for you Sexist Card, but I said tend. This is not always the case, it is simply a trend. If you don’t like it or find that sexist, you can fuck off and die. Men and women are different. Most of us happen to like that. Some men think more emotionally (like pajama boy metrosexual hipster douchebags for example), and some women think more logically (like hot republican warrior babes), but a trend is a trend.

Larry Correia, “Run Forrest Run!”, Monster Hunter Nation, 2014-11-05.

October 22, 2018

The right to repair

Filed under: Business, Government, Law, Liberty, Technology — Tags: , , , — Nicholas @ 03:00

Cory Doctorow:

Companies have always tried to corral their customers into behaving in ways that maximize the companies’ profits, even if that’s not best for the customers: forcing you to use “official” printer ink, to buy your printers and terminals from the same company that sold you your mainframe, to get your apps from the company that sold you your phone.

One especially effective profit-maximization strategy is controlling repairs. If a company can force you to use its official repair services, they can set prices for parts and service, and force you to use original manufacturer’s parts, rather than third-party parts or refurbished parts. And, of course, they can refuse to repair a product after a certain number of years: in the absence of a third-party repair option, this means that you have to throw away your product and buy another one from the company.

Though the urge to control customers to maximize profits is as old as business, the digital era has seen an important shift in the tactics used to make business models mandatory. The abuse of laws like Section 1201 of the DMCA (which bans breaking DRM), the Computer Fraud and Abuse Act (which lets companies treat their “license agreements” as though they had the force of law), as well as trade secrecy and monopolistic supply-chain control has literally criminalized many forms of independent repair, and it’s getting worse.

Last year, 18 state level Right to Repair bills were crushed by a big business coalition led by the tech industry. These bills would end companies’ war on independent service by forcing them to supply parts, manuals, and diagnostic codes to independent technicians.

October 19, 2018

Ontario’s lack of retail cannabis stores – “What have they been smoking at Queen’s Park?”

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

In the Financial Post, William Watson points out the weirdness of Ontario’s decision to delay the opening of legal cannabis stores until next Spring:

For several years now, dozens of dispensaries have been operating quite openly. (They call themselves dispensaries to further the narrative that, like your grandmother’s rye, marijuana is for medicinal purposes.) Only now, with pot use becoming legal, are these dispensaries being shut down — although Toronto’s chief of police says not right away, as he doesn’t have [the] person power to do it all at once.

If they don’t shut down, they may forfeit their chance at a licence to sell pot legally once licensed retail operations do finally start in the province on (when else?) April 1st of next year — 166 days after legalization. Why would they not be granted a licence? Not because they trafficked in marijuana when its use was strictly illegal, if seldom prosecuted. But because they continued to traffic in marijuana after it became legal but before the government gave them a licence, an offence that will be prosecuted slowly, if at all.

Silly me. I thought marijuana legalization would simply say that after a certain date the police wouldn’t arrest you for having such-and-such an amount of marijuana in your possession. End of story.

[…]

Countrywide, as the Financial Post’s Vanmala Subramaniam recently reported, a big roadblock to timely legal supply has been the need to seal products with federal excise revenue stamps. But there’s only one supplier and the stamps come without adhesive. Stamps! In 2018!

In American movies of the 1930s and 1940s, moonshiners and bootleggers waged war against “revenuers,” federal agents charged with levying excise taxes on booze. It seems the revenuers have now taken charge of Canada’s marijuana industry. You might plausibly argue that the former illegal market operated in the interests of consumers. There seems little doubt the new legal market will operate in the interest of governments, their unions and their revenue departments.

When cops did enforce the country’s no-toking laws, they could plausibly tell themselves they were doing it to protect young people and other innocents. Now when they enforce the laws they’re doing it to protect legally privileged producers against producers who find themselves offside with often arbitrary licensing laws. Protecting kids was one thing. Protecting cartels is quite another.

October 16, 2018

Fast food outlets cluster in poorer areas – because they’re low-margin businesses

Filed under: Business, Food, Health — Tags: , , , — Nicholas @ 03:00

Tim Worstall debunks the “fast food restaurants are preying on the poor” myth:

Contrary to the musings of Rod Liddle in the Sunday Times there is a cause and effect going on over the placings of fast food restaurants or outlets in British towns. The provision of burnt chicken and maybemeatburgers to the hoi polloi is a hugely competitive business. This means that it is also low margin. So, where do you put the places that are in a low margin line of business?

[…] this is about clustering of those nosh joints. Why are they in the poor areas? Well, for the same reason the poor are in the poor areas. They’re cheap. This being rather the defining point about poor people, they look for cheap places to live. The two are therefore synonymous, poor and cheap. And what is it we’ve just said about nosh? That it’s a low margin business. Therefore purveyors of the deep fried and battered saveloy – that joy of the ages – are going to be clustered in the poor part of town where they can afford the rents.

And that’s our cause and effect. Some poor people are poor because they’re, or have been, ill. They’re in the cheap part of town because they’re poor. Fried gut shops are in poor areas because they don’t make much money therefore they’re in the poor part of town. Absolutely any analysis of the phenomenon which doesn’t account for this is wrong. And no analysis done by anyone does take account of it – therefore all current analyses of the point are indeed wrong.

There are also other factors to consider, including the fact that poor people are less likely to have the ability or facilities to prepare their own meals (or the habit of cooking for themselves), so the easy availability of high-calorie fast food or snacks is rather important to them. When you’re hungry and don’t have a fridge or freezer full of food at home, a burger or fried chicken has a much stronger appeal than it does to more wealthy folks with well-stocked pantries. If you’ve been raised on high-fat/high-salt foods, the “healthier” alternatives may not appeal, as they also are less flavourful than their fast food options.

October 13, 2018

On the cusp of legalization

Filed under: Business, Cancon — Tags: , , — Nicholas @ 05:00

Colby Cosh finally gets to take a victory lap:

On Thursday the marijuana company Sundial Growers held a ribbon-cutting for its new grow-op in the Alberta town of Olds. I am not sure whether “grow-op” is an acceptable word in the new setting of giant legal cannabis cultivation facilities, but let’s stick with it, if only to call attention to the extraordinariness of what we are witnessing this month in Canada. The launch was held in a small office, and Sundial only received its cultivation licence from Health Canada on Sept. 14, but the first fruits of its pot business are already budding in a room nearby.

The company intends to have a 500,000-square-foot growing facility built in 2019, but its press release points out that it can add more space quickly. I might have been stopped short by the spectacle of the mayor and the (United Conservative) MLA rejoicing as a CEO explained the details of his craft weed business and remarked on plans for a “Sweet Jesus” varietal. But what really struck me is something the mayor said: When the company is up and fully running, he observed, it is going to hire 500 people in Olds, becoming the town’s largest single employer. Olds is, of course, home to Olds College, a century-old agriculture and food research institute: this was a major reason for the new marijuana industry to locate there.

How long ago would this scene — being played, as it is, in a naturally conservative part of the Alberta hinterland — have seemed like science fiction or parody? The Sundial facility is dwarfed by the 800,000-square-foot Aurora Sky factory, strategically located near Edmonton’s awkwardly remote international airport in the suburb of Nisku. Everyone who has ever tried to flee Edmonton or come to it through that airport has complained about its preposterous distance from the capital’s downtown, but this turns out to have an unimagined advantage. You can build a spacious agri-pharmaceutical facility at low cost practically next to the runway, establish an ultra-secure, ultra-short supply chain, and presto hemp-o: overnight response to a worldwide medical market for cannabis products becomes a snap.

I am someone who is entitled to a victory lap for having insisted years ago that we were not, as a country, properly imagining the dimensions of a legally unleashed cannabis industry. We had no idea how much economic activity was being annihilated by a perverse, illogical feature of criminal law. Maybe it is time, as Finally Doing The Obvious Thing Day nears, for me to take that victory lap.

October 10, 2018

Riding the Rocky Mountaineer

Filed under: Business, Cancon, Railways — Tags: , , , , — Nicholas @ 03:00

Fred Frailey just got back from a trip on the Rocky Mountaineer and he’s enthusiastic about the train and the experiences it offers (for a price):

I’m just back from railing from Banff, Alta., to Vancouver, B.C., aboard the Rocky Mountaineer … my first such trip in 23 years. Then, it was eight or nine Silver Leaf coaches and a single Gold Leaf bilevel first-class car. This time, it was two coaches and five packed Gold Leaf cars. From the rail trip alone, I figure that Armstrong Group grossed a minimum of $600,000.

The Rocky Mountaineer in the Rockies.
Photo by The Land via Wikimedia Commons.

Usually (but not this time) there’s a section of roughly equal length out of Jasper, Alta., that joins the Banff train at Kamloops, B.C., so this train can easily be a $2 million-dollar baby when the passenger count tops 1,000 (we had 350). But my sense is that Armstrong Group brings in a at least a much money booking people on pre-train and post-train tours and luxury hotel stays.

I’ve always sensed a lot of railfan resentment of Peter Armstrong. The beef is that he “stole” from VIA Rail Canada the idea of an all-daylight trip along the Rocky and Selkirk mountains and the Thompson and Fraser rivers. For sure, the man plays for keeps; he is forever wishing to axe VIA’s Toronto-Vancouver Canadian as a government-funded competitor west of Jasper or to have the train sold to his company to redo in some Rocky Mountaineer manner.

But give the man his due. He created something lasting by becoming one of the few people to run passenger trains more than a few miles and make money at it. Who knows where the Canadian will be in a decade; it keeps losing fingers and hands as frequencies are trimmed and schedules lengthened. But the Rocky earns its way commercially, having proven its durability by weathering 2008-2009’s Great Recession.

In the latest issue of Trains, my colleague Bob Johnston writes an excellent capsule history of this service: “One factor driving the decision to move the Canadian over to [the Canadian National] route was lobbying by Vancouver entrepreneur Peter Armstrong to privatize VIA’s summer excursions to Banff, Alta., introduced in 1988. This came with the understanding that his fledging operation would get route exclusivity and some initial financial assistance from VIA to ensure the venture’s success. After a few shaky early years, Armstrong invested heavily in specialty dome cars to make Rocky Mountaineer a financial and creative success in a way the public funded operator never could.”

October 8, 2018

QotD: The closed-source software dystopia we barely avoided

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

Thought experiment: imagine a future in which everybody takes for granted that all software outside a few toy projects in academia will be closed source controlled by managerial elites, computers are unhackable sealed boxes, communications protocols are opaque and locked down, and any use of computer-assisted technology requires layers of permissions that (in effect) mean digital information flow is utterly controlled by those with political and legal master keys. What kind of society do you suppose eventually issues from that?

Remember Trusted Computing and Palladium and crypto-export restrictions? RMS and Linus Torvalds and John Gilmore and I and a few score other hackers aborted that future before it was born, by using our leverage as engineers and mentors of engineers to change the ground of debate. The entire hacker culture at the time was certainly less than 5% of the population, by orders of magnitude.

And we may have mainstreamed open source just in time. In an attempt to defend their failing business model, the MPAA/RIAA axis of evil spent years pushing for digital “rights” management so pervasively baked into personal-computer hardware by regulatory fiat that those would have become unhackable. Large closed-source software producers had no problem with this, as it would have scratched their backs too. In retrospect, I think it was only the creation of a pro-open-source constituency with lots of money and political clout that prevented this.

Did we bend the trajectory of society? Yes. Yes, I think we did. It wasn’t a given that we’d get a future in which any random person could have a website and a blog, you know. It wasn’t even given that we’d have an Internet that anyone could hook up to without permission. And I’m pretty sure that if the political class had understood the implications of what we were actually doing, they’d have insisted on more centralized control. ~For the public good and the children, don’t you know.~

So, yes, sometimes very tiny groups can change society in visibly large ways on a short timescale. I’ve been there when it was done; once or twice I’ve been the instrument of change myself.

Eric S. Raymond, “Engineering history”, Armed and Dangerous, 2010-09-12.

October 5, 2018

When the marketing department took over tool sales

Filed under: Business, Tools — Tags: , — Nicholas @ 05:00

Paul Sellers was standing in line at one of his local big box store (in my part of North America, it’d be a Home Depot or Lowes), and he happened to glance at some of the packaging for otherwise pretty ordinary tools:

I’m never sure when it started, a point where you could no longer determine what something is by its name. A form of sensationalism was somehow loosed and we lost sincerity to titles declaring ‘not ordinary’ that hid what was, when all said and done, intrinsically quite the ordinary. All the handsaw makers followed suit latterly with model names like piranha, sabretooth and barracuda. Then they backed up claims with reference terms such as, “Using a handsaw impacts on all the muscles and joints in your arm. The ERGO™ handle is designed with users, tasks and environments in mind to make the job…” blah, blah, blah! The truth is that saw makers of the 18th century put far more effort into the development of ergonomic design of saw handles than any modern maker and all modern makers either copied what existed or dumbed down the designs to come up with the most basic one-size fits all design.

Photo by Paul Sellers

In reality of course nothing’s really changed except that the handles are pre moulded plastic and the teeth cannot be sharpened any more. I was in my local builders merchants waiting to pay and stood staring at the signage of the two nearest products facing me. Whereas these stab saws and jab saws convey a sense of brutalising aggression, it’s the marketer that suggests that this is what the buyer needs. Aggressive marketers think that that is indeed what the user wants, a kind of macho-man aggression to his work. The packaging has changed to use brighter hi-viz lines, letters and numbers with rip tares and wild hogs with tusks as the marketers way of connecting the would-be user to a sale of his products. Imagine, even a common degreasing agent remains the same as it was ten years ago is packed and wrapped with a punchy headline header, “Cleans like crazy!”, too, but why the wild ‘Mad Hog’ title replete with tusks? Reminds me of the Arkansas Razorback football team. What they don’t probably realise is that they would have sold as well without it. I guess they thought that they had that insider knowledge of what the trades people needed, right?

My suspicion is that there are really two distinct markets for tools and tool-related products like these. The first, and more stable market is the trades, where the demand is probably pretty steady and unlikely to shift much no matter what the marketers put on the packages. Tradespeople generally like to use known brands that they can depend on for consistent value at a given price point. These folks aren’t the target for all the marketing flash and bumf — they’ll keep buying the “Old Reliable™” brand until/unless they sell the brand to a cheaper manufacturer and the quality of the end product starts to slip. The target instead is … you. You, the non-regular user of “jab saws” or “stab saws” or even degreasing agents. You probably don’t have much recent experience with any of the current brands of tools, so you’re significantly more likely to be swayed by how the tools and materials are marketed. You’re the sucker who (they hope) will fall for the bright colours, eye-catching packaging, and mucho-macho descriptions.

And they wouldn’t keep doing it if it didn’t work.

A quick way for Doug Ford to reduce Ontario’s electrical rates

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

Ross McKitrick, Elmira Aliakbari and Ashley Stedman outline one of the fastest ways for the Ontario government to get Ontario electricity rates back down toward the national average:

The Ford government seems to want to repair Ontario’s electricity market. It recently moved to scrap the Green Energy Act and reportedly plans to eliminate or alter the so-called Fair Hydro Plan.

While these moves will mitigate future price increases, they won’t reduce current electricity prices. In fact, according to a Fraser Institute study being released today, to lower existing prices the government must reduce what’s known as the “Global Adjustment” — an extra charge on electricity. It won’t be easy, but reducing the global adjustment could bring down electricity prices by about 24 per cent.

This would be welcome news for Ontarians, as electricity prices increased 71 per cent from 2008 to 2016, far outpacing electricity-price growth in other provinces.

[…]

Between 2008 and 2017, the GA grew from less than one cent per kilowatt-hour (a common billing unit for energy) to about 10 cents, accounting for the entire increase in Ontario electricity commodity costs over that time. Therefore, the key to lowering power prices in Ontario is to reduce the GA.

In our study, we use reports published by the Ontario Energy Board to breakdown the GA to better understand where the money goes and provide specific recommendations on how to lower electricity prices. We found that the largest component of the GA charge — nearly 40 per cent — funds subsidies paid to renewable energy sources (wind, solar, etc.) under feed-in-tariff contracts, yet these sources only provide seven per cent of Ontario’s power output.

And notably, the GA provides almost 90 per cent of revenue earned by renewable generators, with only 10 per cent coming from actual power sales. This overwhelming reliance on government subsidies (paid by ratepayers) rather than actual electricity sales reveals how distorted the pricing structure has become in Ontario.

October 3, 2018

USMCA (aka son-of-NAFTA) – what’s the damage after all?

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

The most common sentiment from Canadian comments appears to be “meh, it could have been much worse”. That doesn’t mean it’s particularly good, either:

All that cross-border yelling, a solid year of bluster and petulance, dire rhetoric about “stabs in the back” and “special places in hell,” fake deadlines and all-night negotiations, and we end up with pretty much the agreement we started with? All that was required to fix NAFTA, that destroyer of American jobs and pox on its prosperity, the deal Donald Trump memorably complained was “the worst agreement in history,” was to change its name — from North American Free Trade Agreement to US-Mexico-Canada Agreement? Seriously?

Not quite. The result is certainly a far heave from some of the more apocalyptic scenarios we had been entertaining ourselves with. But neither is it the largely unaltered “NAFTA 2.0” of much initial comment. There are substantive changes in there, most of them bad, and not all of them imposed by an overbearing U.S. on an unwilling Canada.

Still, it’s not quite the conflagration we’d been banking on, is it? Trump is the bully in middle school who threatens to take your lunch money, only to settle for a half a slice of your pizza. Or, in this case, 3.6 per cent of it.

That’s the share of the Canadian dairy market to which the U.S. will now have tariff-free access, a slight advance on the 3.25 per cent market share the U.S. had negotiated under the Trans Pacific Partnership — before Trump withdrew from it. (Oh, and “milk price classes 6 and 7” are eliminated, for fans of that dispute. It involves skim milk solids.) There are also some minor increases in tariff-free imports in the other supply-managed sectors: eggs, chicken, cheese and so on. Everything else will face the same triple-digit tariffs, as before.

That’s unfortunate. Supply management is a blight on the Canadian political and economic landscape we could well do without. The NAFTA re-negotiations were an ideal opportunity to bargain it away, as it should have been in the original NAFTA. That it remains more or less intact — even the dairy lobby could manage only a half-hearted jeremiad of imminent lacto-doom in response — is one of the chief disappointments in this agreement.

Still, what did you expect? There was never any chance of these negotiations resulting in a deepening and broadening of NAFTA — not with protectionists on both sides of the table. The only question was whether the status quo protectionists on this side — who wished to preserve all of NAFTA’s existing exemptions — could hold out against the expansionist protectionists on the other, who wished to cut NAFTA into little mercantilist pieces. As it turns out the answer is: surprisingly well.

A quick summary of the winners and losers in this agreement:

Is this a free trade agreement?

No. Unlike NAFTA, this latest agreement makes no pretense to be about free trade (or even freer trade). It’s a protectionist agreement imposed by the U.S. on the other two countries.

Who benefits from the agreement?

The primary beneficiaries of the agreement are labor unions, U.S. dairy farmers, U.S. drug manufacturers, and companies that provide automation for manufacturers (e.g., robot makers).

The agreement will require at least 30 percent of cars (rising to 40 percent by 2023) to be made by workers earning $16 an hour. This will force more cars to be produced in the U.S. and Canada since the typical manufacturing wage in Mexico is only about $5 per hour. The agreement also requires Mexico to make it easier for workers to form unions, which will make them less competitive against more productive unionized workers in the U.S. and Canada.

U.S. dairy farmers will also gain greater access to the Canadian market. Because of new restrictions on how much dairy Canada can export, there is the potential for U.S. dairy to gain a greater market share in foreign countries.

U.S. drug companies will also be able to sell pharmaceuticals in Canada for 10 years (rather than eight) before facing generic competition.

Because the agreement makes human labor in the three countries somewhat more costly, companies that create robots and other automation will likely be the long-term beneficiaries.

Who are the biggest losers in this agreement?

As with almost all protectionist trade agreements, consumers are the ones who will be hurt the most.

As the Washington Post notes, economists and auto experts think USMCA is going to cause car prices in the U.S. to “rise and the selection to go down, especially on small cars that used to be produced in Mexico but may not be able to be brought across the border duty-free anymore.”

Because the restrictions on Canadian steel and aluminum also remain in place, businesses that use those materials in manufacturing will pay inflated prices, and their products will be less competitive on the global market.

September 29, 2018

The Ontario government’s amazingly sensible approach to legal cannabis

Filed under: Business, Cancon, Law, Liberty — Tags: , , , , — Nicholas @ 03:00

Chris Selley expresses what a lot of surprised people must be feeling after Premier Doug Ford’s government introduced startlingly mature and sensible rules for the distribution and sale of cannabis products in the province after the federal government’s legalization is enacted:

The Ontario government tabled its cannabis retail framework in the legislature on Thursday, and it only further repudiates the Frightened Communist model envisioned by the Liberals. The government will sell pot online, as before, and will maintain a monopoly on wholesaling. But the rest will be up to the private sector, under the control of the Alcohol and Gaming Commission. As it stands, there won’t even be a cap on the number of licences; a government official said Thursday they expect 500 to 1,000 applications right off the bat.

In response, OPSEU president Smokey Thomas beamed out a furious press release on behalf of his spurned members — er, sorry, on behalf of Ontario’s “municipalities and communities.”

“Unlimited stores and unlimited places to smoke will cause unlimited problems,” Thomas averred. “It’s outrageous. We’re going to become the wild west of cannabis and Sheriff Doug Ford is going to skip town, leaving communities and municipalities holding the dime bag.”

Thomas predicted Premier Ford would hand out retail pot licences to “Conservative insiders” and “corporate donors.” (Corporate donations are illegal.) He accused Ford of funnelling what by rights should be public profits into “private pockets.”

“If Ontario’s finances are truly as bad as Ford wants us to believe, why is he giving away the millions, maybe even billions, in revenue we’d get if cannabis sales were public?” he asked.

Does the government make money on cigarettes? On alcohol sold in bars and restaurants, at privately run LCBO agency stores and, of late, in supermarkets? Of course it does. Scads of it.

So it’s all quite ridiculous, as OPSEU press releases tend to be. But Thomas is not wrong when he argues the new approach is remarkably permissive. Perhaps most notably, whereas the Liberals’ proposed rules banned using marijuana in public, the PCs’ would allow you to smoke or vape it anywhere you can tobacco (though not in cars or boats). But it’s far less permissive than one might expect in other ways as well.

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