Quotulatiousness

August 30, 2018

Britain “forgets” to regulate e-cigarettes, youth smoking drops substantially

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

Last month, Matt Ridley sang the praises of the regulators who didn’t regulate:

A selection of e-cigarettes
Photo by Ecig Click via Wikimedia Commons.

Britain is the world leader in vaping. More people use ecigarettes in the UK than in any other European country. It’s more officially encouraged than in the United States and more socially acceptable than in Australia, where it’s still banned. There is a thriving sector here of vape manufacturers, retailers, exporters, even researchers; there are 1,700 independent vape shops on Britain’s streets. It’s an entrepreneurial phenomenon and a billion-pound industry.

The British vaping revolution dismays some people, who see it as a return to social acceptability for something that looks like smoking with unknown risks. Yet here, more than anywhere in the world, the government disagrees. Public Health England says that vaping is 95% safer than smoking and the vast majority of people who vape are smokers who are partly or wholly quitting cigarettes. The Royal College of Physicians agrees: “The public can be reassured that ecigarettes are much safer than smoking.”

Lots of doctors are now recommending vaping as a way of quitting smoking. It is because of vaping that Britain now has the second lowest percentage of people who smoke in the European Union. The youth smoking rate in the UK has fallen from 26% to 19% in only six years.

How did this happen here? It’s partly the fault of the advertising executive Rory Sutherland; he is the Walter Raleigh of this revolution. In 2010, he walked into an office in Admiralty Arch to see an old friend, David Halpern, head of David Cameron’s new “nudge unit”, formally known as the Behavioural Insights Team. Sutherland pulled out an electronic cigarette he had bought online, and inhaled. By then, several countries including Australia, Brazil and Saudi Arabia had already banned the sale of electronic cigarettes — usually at the behest of tobacco interests or public-health pressure groups. California had passed a bill banning them, though Arnold Schwarzenegger, then the governor, had vetoed it. It looked inevitable that Britain would follow suit.

“I was a very early convert,” Sutherland tells me now. “Partly because I was a longtime ex-smoker myself who found them much better than constant relapses; I was also interested in the placebo effect they offered by mimicking the act of smoking. But I was almost equally fascinated by the psychology of the people who instinctively wanted to ban them.”

Halpern took notice. He knew the theory of “harm reduction” — that it is more effective to give somebody the lesser of two evils than insist unrealistically on immediate abstinence. So he asked his nudge team to get digging. Over coffee at No 10, he was surprised to learn that even the anti-smoking group Ash was leaning in favour of ecigarettes. So when public-health nannies started calling for them to be banned, Halpern made sure the government resisted.

In his book Inside the Nudge Unit, Halpern wrote: “We looked hard at the evidence and made a call: we minuted the PM and urged that the UK should move against banning e-cigs. Indeed, we went further. We argued we should deliberately seek to make e-cigs widely available, and to use regulation not to ban them but to improve their quality and reliability.”

H/T to Rafe Champion for the link.

August 29, 2018

The Conservative convention, bought and paid for by the friends of supply management

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

Colby Cosh relates the details of how well stage-managed the Conservative convention in Halifax was … from the point of view of the beneficiaries of supply management:

A copy of a “briefing binder” that the Dairy Farmers of Canada had given to representatives of supply-managed agriculture was carelessly discarded, found by a Calgary delegate named Matthew Bexte, and splattered onto the internet. The contents of the binder describe the strategy and outline the available forces of the supply-management squad. The resolutions being discussed by the convention included one favouring the repeal of expensive tariff protection for Canada’s egg, dairy, and poultry cartels, and the binder lists the particular responses and tactics to be used depending on how far the offending free-trade resolution advanced in the debate.

Which it didn’t. The motion in favour of letting Canadian suckers buy foreign cheese in dangerous unregulated quantities died noisily in a “breakout session,” never even reaching a vote, much less the plenary session of the convention. As the National Post’s uncannily versatile Marie-Danielle Smith documented before the briefing book was leaked, free-trade delegates had already caught the scent of a rat, complaining that the motion had been suppressed through strategic delay by operatives working for party leader Andrew Scheer.

The Dairy Farmers of Canada briefing describes this motion-suppression tactic as “Scenario 2,” calling it a “sub-optimal” outcome: “It buys us (supply-managed farmers) a reprieve, but doesn’t put the issue to rest.” According to the briefing notes, if the motion had passed in the Friday breakout session, that would plunge the world into “Scenario 3.” Under Scenario 3, a Friday evening reception at an Irish pub, with free food and potables, would come into play: quota-sucking farmers and their public-relations goons would have been given a chance to mingle with well-lubricated CPC delegates, with “infographics on a slideshow” pulsing subliminally in the background.

The hope here would be to prevent a devastating “Scenario 5,” in which the destruction of supply management came before the whole CPC assembly for a vote and won it. The prospective talking points accompanying Scenario 5 warn that “Members of the Conservative Party of Canada have sent a clear signal that they do not support Canadian farmers” and they hiss menacingly that “Canadians will remember the position taken by Conservatives today.”

Fortunately, even in the event of a flat-out Scenario 5, there would still be what the book calls the “Safety Net.” The safety net is that annual party conventions are meaningless, expensive balderdash anyway. Or, as the Dairy Farmers of Canada (DFC) book puts it: “The powers of the Leader are far-reaching in preventing a policy from being in the party platform. DFC has been told by the Leader’s office that he will exercise this power … regardless of the outcome at convention.”

Good old Andrew … he knows who put him in his current position and has signalled in advance that he’ll “stay bought”. Too bad for Canadian consumers, but great news for the leeches who benefit from the market distortions of supply management.

August 24, 2018

From Software-as-a-Service to emerging Techno-Feudalism

Filed under: Business, Europe, History, Technology — Tags: , , — Nicholas @ 03:00

The shift from selling software to selling software subscriptions was a major sea-change in the technology world. Here’s a bit of historical perspective from The Z Man to explain why this could be a very bad thing indeed for the average user:

Feudalism only works when a small elite controls the source of wealth. Then they can control the exploitation of it. In Europe, as Christianity spread, the Church acquired lands, becoming one of the most powerful forces in society. The warrior elite was exclusively Catholic, thus they had a loyalty to the Pope, as God’s representative on earth. Therefore, the system of controlling wealth not only had a direct financial benefit to the people at the top, it had the blessing of God’s representative, who sat atop the whole system.

That’s something to keep in mind as we see technology evolve into a feudal system, where a small elite controls the resources and grants permission to users. The software oligopolies are now shifting all of their licensing to a subscription model. It’s not just the mobile platforms. Developers of enterprise software for business are adopting the same model. The users have no ownership rights. Instead they are renters, subject to terms and conditions imposed by the developer or platform holder. The user is literally a tenant.

The main reason developers are shifting to this model is that they cannot charge high fees for their software, due to the mass of software on the market. Competition has drive down prices. Further, customers are not inclined to pay high maintenance fees, when they can buy new systems at competitive rates. The solution is stop selling the stuff and start renting it. This fits the oligopoly scheme as it ultimately puts them in control of the developers. Apple and Google are now running protection rackets for developers.

It also means the end of any useful development. Take a look at the situation Stefan Molyneux faces. A band of religious fanatics has declared him a heretic and wants him burned. The Great Church of Technology is now in the process of having him expelled from the internet. As he wrote in a post, he invests 12 years building his business on-line, only to find out he owns none of it. He was always just a tenant farmer, who foolishly invested millions in YouTube. Like a peasant, he is now about to be evicted.

How long before someone like this monster discovers that Google and Apple will no longer allow him to use any apps on his phone? Or maybe he is denied access to his accounting system? How long before his insurer cuts off his business insurance, claiming the threat from homosexual terrorists poses too high of a risk? Federal law prevents the electric company from shutting off his power due to politics, but Federal law used to prevent secret courts and secret warrants. Things change as the people in charge change.

August 23, 2018

Cultural Appropriation Tastes Damn Good: How Immigrants, Commerce, and Fusion Keep Food Delicious

Filed under: Americas, Business, Food, Health, USA — Tags: , , — Nicholas @ 02:00

ReasonTV
Published on 1 Aug 2018

Writer Gustavo Arellano talks about food slurs, the late Jonathan Gold, and why Donald Trump’s taco salad is a step in the right direction.
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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.

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The late Jonathan Gold wrote about food in Southern California with an intimacy that brought readers closer to the people that made it. The Pulitzer Prize–winning critic visited high-end brick-and-mortar restaurants as well as low-end strip malls and food trucks in search of good food wherever he found it. Gold died of pancreatic cancer last month, but he still influences writers like Gustavo Arellano, Los Angeles Times columnist and author of Taco USA: How Mexican Food Conquered America.

Arellano sat down with Reason‘s Nick Gillespie to talk about Gold’s legacy, political correctness in cuisine, and why Donald Trump’s love of taco salad gives him hope in the midst of all of the president’s anti-Mexican rhetoric. The interview took place at Burritos La Palma, named by Gold as home to one of the five best L.A. burritos.

August 15, 2018

Hotel security theatre meets DEF CON attendees in Las Vegas

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

Las Vegas hotels have a clear duty to be more vigilant about their security procedures, but the folks at the most recent DEF CON gathering were perhaps not the best-chosen group to try out a new “swaggering bully-boys security enforcement” policy:

In the wake of the mass shooting in Las Vegas in October of 2017, hotels in the city started drafting more aggressive policies regarding security. Just as Caesars Entertainment was rolling out its new security policies, the company ran head on into DEF CON — an event with privacy tightly linked to its culture.

The resulting clash of worlds — especially at Caesars Palace, the hotel where much of DEF CON was held — left some attendees feeling violated, harassed, or abused, and that exploded onto Twitter this past weekend.

Caesars began rolling out a new security policy in February that mandated room searches when staff had not had access to rooms for over 24 hours. Caesars has been mostly tolerant of the idiosyncratic behavior of the DEF CON community, but it’s not clear that the company prepared security staff for dealing with the sorts of things they would find in the rooms of DEF CON attendees. Soldering irons and other gear were seized, and some attendees reported being intimidated by security staff.

And since the searches came without any warning other than a knock, they led, in some cases, to frightening encounters for attendees who were in those rooms. Katie Moussouris — a bug bounty and vulnerability disclosure program pioneer at Microsoft, an advocate for security researchers, and now the founder and CEO of Luta Security — was confronted by two male members of hotel security as she returned to her room. When she went into the room to call the desk to verify who they were, they banged on the door and screamed at her to immediately open it.

In another case, a hotel employee—likely hotel security—entered the room of a woman attending DEF CON without knocking:

August 14, 2018

Ontario embraces online sales for marijuana, with retail stores to follow in 2019

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

Chris Selley on the Ontario government’s surprisingly sensible approach to phasing in retail sales of cannabis over the next eight months:

Ontario’s Progressive Conservative government called a brief truce in its multi-front war with the federal Liberals on Monday to give one of Prime Minister Justin Trudeau’s signature policies a major boost: as had been widely rumoured, the Tories will scrap the previous Liberal government’s tentative public marijuana retail scheme and instead hand out licenses to the private sector.

How many licenses and what kinds of stores are just two of many unresolved details. The government says it will consult widely to determine how best to proceed, with a target opening date for licensed brick-and-mortar stores of April 1, 2019 (with publicly run online sales to commence in October). But it seems safe to hope the cap, if any, will be significantly higher than the previous government’s laughably timid 150.

Thanks to Toronto’s reluctantly laissez-faire approach to illegal storefront (nudge-wink) “medical” marijuana “dispensaries,” we know 150 might not even satisfy a free market in the country’s largest city. Trudeau has always said the goal of legalization was to smash the illegal market and plunk down a legal one in its place. The Ontario Liberals’ plan seemed almost tailor-made to fail in that endeavour.

There remains ample room for the new government to screw this up. But if it gets pricing and regulation and enforcement halfway right, the country’s most populous province should now be well placed to give legalization a good shot at achieving what proponents have always said it should — which is, basically, to make it like booze. Of course kids still get their hands on booze, but at least it’s a bit of a chore. And at least when kids get drunk, they’re not drinking moonshine.

The need to claim the retail market from the existing extra-legal networks will hinge on quality, availability and (especially) the prices that the province sets. Price it too high (pun unintentional), and the legal market will not take over distribution and sales from the black market. Provide poor quality and get the same results. Restrict sales too stringently, and watch the profits go back to the current dealers … who are not noted for their sensibilities about selling drugs to the under-aged.

In the meantime, it’s interesting to ponder why they’re going in this direction. Fedeli and Attorney-General Caroline Mulroney were at great pains Monday to stress their primary concern was the children.

“First and foremost, we want to protect our kids,” said Mulroney. “There will be no compromise, no expense spared, to ensure that our kids will be protected following the legalization of the drug.”

“Under no circumstances — none — will we tolerate anybody sharing, selling or otherwise providing cannabis to anybody under the age of 19,” said Mulroney. Fedeli vowed that even a single sale to a minor would void a retailer’s license.

Yet, let’s be honest, kids well under the age of 19 can already get cannabis and other illicit drugs — more so in urban and suburban areas, but it’s hard to imagine that legalizing cannabis for 19-plus customers somehow magically renders the under-19s uninterested in getting access, too.

August 11, 2018

Second-hand bookshops

Filed under: Books, Britain, Business — Tags: , — Nicholas @ 03:00

An old Theodore Dalrymple article on the disappearing treasures (to some of us, anyway) of the second-hand book trade:

My love of money is so far unrequited, perhaps because I do not love it quite enough, which is to say to the exclusion of all other possible objects of adoration and devotion. Likewise I remain firm in my admiration of those who do not work exclusively or even principally for money; and among the latter must surely be English provincial sellers of second-hand books

Theirs is indeed a dying trade, and entering their shops – now, alas, fewer and fewer – one cannot help but wonder whether it ever truly lived. As long as I can remember, which is now quite a long time, they have been cold with a kind of irredeemable cold, an absence of warmth upon which no paraffin heater, no pre-war single bar electric heater (of the kind favoured by booksellers), no clement weather, can make the slightest impression. When you take a book from a shelf of one of these bookshops you get a puff of cold air in the face, as well as of dust, as if you had opened a mediaeval tomb complete with a curse against grave-robbers. One associates dust with dry heat, but this, at least where English provincial second-hand bookshops is concerned, is a mistake. They contrive to be cold, dusty and damp at the same time.

It is all the more remarkable, then, that in so materialistic an age as our own people can be found who not only spend, but want to spend, and cannot conceive of not spending, their working lives in such conditions, and all for little monetary reward. True, they are more or less protected by their avocation from the seamier and more violent side of modern society; burglars and armed robbers in even the worst areas for crime do not think to break into second-hand bookshops; and the comings and going of governments do not trouble them. Not for them, either, the shadow-boxing of modern party politics, in which one political mountebank sets himself up as the last bastion against the depredations of another, in truth not very dissimilar, mountebank. Rather they concern themselves with the eternal verities of light foxing, cocking, small tears to dust jackets, and the like. The worst that can happen to them is a gentle slide into insolvency as rents rise (all such shops are now found in the unlikeliest places because they can survive only where rents are low) and readers decline – both in number and in discrimination. For my money (of which, incidentally, they have taken a lot down the ages) they are the unsung heroes of our culture.

Their lives are precarious. For example, the other day I went into one such bookshop in the North of England, run by a husband and wife team, and bought for a sum that nowadays no one – no bourgeois that is – would hesitate to lay out for lunch, a slimmish volume published in 1857, that was in almost pristine condition. The lady was almost pathetically grateful: she said that by my single purchase I had paid half her rent for the day. I felt as if I had almost done a good deed.

Image via Google Maps street view

The majority of my own collection has been bought at used book shops, especially Gryphon Books in Port Hope and Willow Books and Books Galore in Port Perry. I haven’t been travelling much outside my immediate local area for the last several years, so Abebooks has been a very useful addition to my virtual book-buying range. I note, with mild sorrow, a few of my other favourite book shops have disappeared: especially the best military used book store in Ontario, Grenadier Books in Port Perry (moved to Montreal after the death of the founder), and the Book Vault in Stratford (the seasonal tourist traffic wasn’t enough to cope with rising rent).

August 10, 2018

QotD: Demands for “fair” trade

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

Whenever you hear someone demand that trade be made “fair” – whenever you hear someone plead for trade to be conducted on a “level playing field” – you can bet your pension that you are hearing a domestic producer, or its spokesperson, soliciting the state for protection from competition. You are hearing sweet words mask a sour plea for monopoly power. You are hearing a greedy corporation or other politically powerful producer group appeal to those who hold power that that power be wielded against fellow citizens who dare to spend their own money in ways that promote their and their families’ best interests rather than in ways that promote the interests of the greedy corporation or other politically powerful producer group.

You are hearing, in short, a seeker of unfair privilege – a demander that the playing field be tilted against consumers’ and society’s broad interests and toward its own narrow interests.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2016-11-01.

August 7, 2018

“[Trudeau’s] ideology is jeopardizing 20% of the Canadian economy”

Brandon Kirby on Prime Minister Justin Trudeau’s failing efforts to negotiate with the United States on trade:

Trade with Canada constitutes 2% of America’s GDP and trade with America constitutes a whopping 20% of Canada’s GDP. My home province of New Brunswick finds 50% of its private sector exporting to the U.S. – NAFTA is of vital importance to our economy.

The dwindling efforts of Trudeau’s cabinet to negotiate a deal with the Americans could become his government’s greatest failure. With tariffs already being imposed on steel and aluminum, NAFTA is potentially unraveling before our eyes and along with it, the Canadian economy.

Trudeau’s American counterpart isn’t known for his vocal support of trade and yet he handed Canada everything on a silver platter at the recent G7 summit. He offered to remove all tariffs and subsidies on imports and exports, provided Canada did the same. This is about as fair an offer as one could expect. Trudeau retaliated by insisting Canada had been insulted.

The trouble with Trudeau is precisely that. He was given a talking point. He developed rhetoric rather than substance. Akin to Marco Rubio’s disaster of a debate performance, who refused to go off script even when he was being called out for scripted answers, Trudeau had a talking point. It was a good one, Canadians and Americans died together in the mountains of Afghanistan to bring justice for Americans who died on September 11th. Trump alluded to our tariffs on their dairy farmers as a national security threat. But when Trump acquiesced, Trudeau kept to his talking points and refused to go off script, even when his talking points no longer made sense.

The initial renegotiation began with Trudeau’s government attempting to include a chapter on gender. The Americans weren’t enthusiastic about devoting a significant portion of their time at the negotiations to discussing an unenforceable chapter of the deal, but Trudeau pressed on.

The liberal rationale in the briefing notes was leaked, “Think back 20 years and remember the early discussions of labour and environment in the context of trade agreements.”

Environmental and labour standards were included in the negotiations of decades past because a country that has humane labour standards is at a trade disadvantage to countries that neglect their workers and their environment. Gender doesn’t have any bearing on trade. His ideology is jeopardizing 20% of the Canadian economy.

July 28, 2018

QotD: “And are we doing okay?”

Filed under: Business, Food, Humour, Quotations — Nicholas @ 01:00

“And are we doing okay?”

Waiters have all started talking like preschool teachers in the past several years. It is perplexing. It makes me want to do something shocking and violent, but instead I usually just reply with something like:

“Well, we are, last we checked, not, in fact, plural. And we are therefore slightly confused by our insistence upon addressing us as though we had a mouse — or mice? — in our pocket.”

(I only do this if I am alone, inasmuch as it tends to make dinner conversation awkward when your date shrinks into her seat in mortification.)

Kevin D. Williamson, “You and Who Else?”, National Review, 2016-10-02.

July 25, 2018

QotD: How can you tell when a politician is lying?

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

This reality of outright lying during campaigns is so familiar that we excuse it. It’s just what politicians do.

But suppose that a business owner did the equivalent in the market. Such behavior wouldn’t be tolerated by customers or by law-enforcement officials. For example, suppose that the owner of Acme Furniture, in a scheme to get more sales, outright lies with a radio ad that promises that everyone who buys any piece of furniture from Acme will get half of the purchase price refunded in 12 months. “Wow! Darn good deal!” consumers think. They flock to Acme and buy furniture.

One year later, Acme customers submit their applications for the refunds of half of the purchase prices they each paid. But these customers, rather than getting what Acme promised, instead get a note from Acme explaining that the promise of a refund was made in jest; it was designed only to get more consumers to buy furniture from Acme. “But don’t worry!” the letter from Acme continues, “you’re still better off having bought furniture from Acme than from any of Acme’s competitors. Trust me on this! Yours Sincerely,….”

From time to time unscrupulous (and, typically, also really stupid or myopic) business people pull fraudulent stunts such as this one. Yet – rightly – no one excuses these stunts as being par for the course in business. One reason, of course, is that such stunts are not par for the course in private business; far from it. But such stunts are indeed par for the course in politics. And yet, despite this reality, we are constantly told that businesses operating in competitive markets cannot be trusted to behave honestly unless they are regulated by politicians and bureaucrats operating in political ‘markets.’

Politicians lie and such lying is excused because it’s normal. But it’s not normal; it’s not normal in the private sector; it’s normal only in the very abnormal world of politics.

Don Boudreaux, “Politicians Lie Openly and Such Behavior Is Excused Because It’s ‘Normal’”, Café Hayek, 2016-09-05.

July 24, 2018

The impact of licensing on previously unlicensed jobs

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

In the current Libertarian Enterprise, Sean Gabb looks at the recent outrage at Jeff Bezos and Amazon and recounts how at least one job he’d done in the past is now closed off to casual entrants due to the growth of licensing:

Let us imagine a natural order — that is, a world without states, or at least a world without the extended patterns of state-intervention that now exists. In such a world, wage labour would continue to exist. There are benefits in working for someone else. An employee commits to a contract of permanent service, in return for which he receives reasonable certainty of payment. Not everyone is or wants to be an entrepreneur. Not everyone finds it suitable to keep looking for unsatisfied wants and the most rewarding means of satisfying those wants. This being said, there would probably be much less wage labour than there is now.

If the present order of things does little to deter men like Mr Bezos, it does much to deter little people from starting little businesses — little business that sometimes replace, but more often supplement employed income. When I was much younger, the easiest way I found of making extra money was to drive a mini-cab. I went to the nearest cabbing office. I showed my clean driving licence. I showed a certificate of hire and reward insurance. I handed over £25 rent for the week, and was given a two-way radio and a cabbing number. That evening, I was taking prostitutes to their clients and pushing drunks up their garden paths. You cannot do this nowadays. Cabbing is licensed and regulated. It costs thousands to get a licence, and the regulations about age and type of vehicle add tens of thousands more to the costs of entry. You cannot get into cabbing unless you can pay these entry costs, and unless you are able to pay them back by working there full-time and long-term. A casual business has been made into a profession.

This is an example of which I have personal knowledge. But there is a vast range of little businesses that bring some money to little people. They have nearly all been placed out of reach. The effect is to increase the supply of unskilled labour seeking employment. Think of a supply and demand diagram. Shift the supply curve to the right. Make it more elastic. Money wages will be lower than they would otherwise be. Conditions of work — and these are part of the overall wage — will be worse. Make laws to prevent the market from clearing, and there will be more unemployment.

A further point I mention without choosing to develop is mass-immigration. This is not the kind of movement you would see in a natural order, where virtually the whole cost of entry and adjustment fell on the individual entrant. It is a movement encouraged and subsidised by the State — encouraged by institutional political correctness, and subsidised by laws that amount to forced association. The effect in economic terms is again on the supply curve for labour.

I have no reason to believe that Mr Bezos and Amazon have done anything to bring about this state of affairs. They simply operate in the labour market as they find it. No one is forced to work for Amazon. Amazon is not a legal monopoly, and has no power to force down wages. It pays at least the going rate. It is not a charity, and cannot be expected to behave as a charity. Blaming Amazon for how it pays and treats its workers makes no more sense than blaming a clock for telling the time.

He also touches on the state-created legal situation of limited liability:

I turn to the objection that Amazon is a limited liability company. This is an objection I accept. Limited liability companies exist because of a grant of privilege by the State. They are treated as persons, responsible for their own debts. Their owners have no liability beyond the value of the shares they own. This grant allows companies to gain more investment capital than they otherwise might. It allows them to grow larger and to exist for longer than they otherwise might. It allows even the most entrepreneurial company to turn gradually into a private bureaucracy, trading favours with the various state bureaucracies. Limited liability turns business into the economic arm of a malign ruling class.

So far as Amazon benefits from limited liability, it is an illegitimate enterprise. But this is not the end of the matter. Amazon almost certainly could exist without limited liability. It would instead have raised its investment capital by selling bonds. It would then only be in form what it plainly is in substance — that is, a projection of its owner’s ambition to achieve greatness. It would still have grown large, and it would have grown large by giving its customers what they want.

July 19, 2018

Crony capitalists of the military-industrial complex

Matthew D. Mitchell comments on some of the problems with government contractors and their all-too-cosy relationship with the government officials who hand out the public’s funds:

… as economist Luigi Zingales explains in his book, A Capitalism for the People, governments contracting with private interests has its own set of risks:

    The problem with many public-private partnerships is best captured by a comment that George Bernard Shaw once made to a beautiful ballerina. She had proposed that they have a child together so that the child could possess his brain and her beauty; Shaw replied that he feared the child would have her brain and his beauty. Similarly, public-private partnerships often wind up with the social goals of the private sector and the efficiency of the public one. In these partnerships, Republican and Democratic politicians and businesspeople frequently cooperate toward just one goal: their own profit.

When President Dwight Eisenhower warned against the “unwarranted influence” of the “military-industrial complex,” he was concerned that certain firms selling to the government might obtain untoward privilege, twisting public resources to serve private ends. It is telling that one of those contractors, Lockheed Aircraft, would become the first company to be bailed out by Congress in 1971.

For many observers, the George W. Bush administration’s “no-bid” contracts to Halliburton and Blackwater appeared to exemplify the sort of deals that Eisenhower had warned of. It is true that federal regulations explicitly permit contracts without open bidding in certain circumstances, such as when only one firm is capable of providing a certain service or when there is an unusual or compelling emergency. In any case, a report issued by the bipartisan Commission on Wartime Contracting in 2011 estimated that contractor fraud and abuse during operations in Afghanistan and Iraq cost taxpayers an estimated $31 to $60 billion. This includes, but is not limited to:

    requirements that were excessive when established and/or not adjusted in a timely fashion; poor performance by contractors that required costly rework; ill-conceived projects that did not fit the cultural, political, and economic mores of the society they were meant to serve; security and other costs that were not anticipated due to lack of proper planning; questionable and unsupported payments to contractors that take years to reconcile; ineffective government oversight; and losses through lack of competition.

Governments may also award contracts to perform a service that has more to do with serving a parochial interest than with providing a benefit to the paying public. For example, Congress may order the Pentagon to procure more tanks even though the Pentagon itself says the tanks aren’t needed. Paying General Dynamics hundreds of millions of dollars to produce unneeded tanks in order to protect jobs in particular congressional districts may be an abuse even if the underlying process by which the contract was awarded is legitimate.

July 18, 2018

QotD: Understanding how company profits can be used

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

In its fight against company tax cuts, [the Australian] Labor [Party] peddles the myth that company tax cuts are a windfall for big businesses and their shareholders, this week even launching ads suggesting [Australian PM] Malcolm Turnbull supports company tax cuts because he’ll personally benefit as an investor.

It’s a myth easily debunked. Think about it. What exactly can a company do with the extra money retained from paying less tax? It can only spend profits in two ways: paying dividends to shareholders or spending more on its operations.

Dividends are subject to tax, including withholding tax for foreign shareholders. Suggesting Turnbull or any other investor will get a windfall is a blatant lie.

In fact, many shareholders will pay more tax to make up the greater difference between the company tax rate and their own tax rate. That’s how dividend imputation works, as Labor well knows.

Alternatively, the company can spend more on things like technology, plant and equipment, funding research and development, expanding its sales force or opening new shopfronts or branches. In other words, more money paid in wages to workers and buying goods and services from suppliers.

All of that spending is also taxed. Workers pay income tax. GST [Goods and Services Tax] is collected on goods and services. Suppliers pay company tax or income tax themselves.

Lower company tax simply allows a business to use more of its money on something productive before the money is collected by government.

Nyunggai Warren Mundine, “Bill Shorten’s Labor would kill the reforms of Hawke and Keating”, Financial Review, 2018-06-26.

July 14, 2018

Trump’s tariffs are working

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

Tim Worstall explains that the recent US price hikes in washing machines is exactly what the Trump administration wanted:

The part of import tariffs that all too many fail to understand is that it is consumers being “protected” by them who actually pay them. That is, import tariffs on foreign goods entering the United States are paid by those inside the United States. Or, as we can also put it, Trump’s tariffs are making Americans poorer. This isn’t a known to be desired effect of economic policy.

However, it’s important to note that the real burden doesn’t come from the rise in price of the imports. It’s what the domestic producers do to us all in the absence of that foreign competition which is important:

The clear and obvious effect of import tariffs – Credit, BLS, via Mark Perry and AEI, by permission

    If you’re unfortunate enough to be shopping for a new washing machine, you can thank the Trump tariffs on imported washing machines, washing machine parts, steel and aluminum for the largest three-month price increase — 16.4% from February to May this year — in the 40-year history of the BLS series for Major Appliances: Laundry Equipment that started in January 1978 (see chart above). In the May CPI report (see Table 2), the one-month increase in the CPI for Laundry Equipment of 7.4% in May followed a 9.6% increase in April, and in both months was the largest monthly price increase of any of the 300 individual CPI categories or sub-categories. For the month of May, the 7.4% increase in the washing machine series was twice the increase of the next highest increase of 3.7% for educational books and supplies (mostly college textbooks).

What’s worse than this price rise is that this is planned. This is the desired outcome from the people who imposed these taxes.

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