Published on 22 Mar 2017
This week, Antony & James take on the idea of “victimless crimes” and discuss the odd and growing trend of governments regulating some private activities such as pornography, while others like smoking marijuana are increasingly allowed. People imposing their values on others seems to boil down to an inability to appreciate that others have different preferences, but it all results in Americans losing freedom and instead becoming a nation of pets.
Learn more here:
https://fee.org/articles/were-becoming-a-nation-of-pets/
http://www.antolin-davies.com/research/trib0217.pdf
http://www.antolin-davies.com/research/philly0317.pdf
March 23, 2017
Words & Numbers: We’re Becoming a Nation of Pets
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The rent is too damned high? I know – let’s kill the rental market!
Toronto’s real estate market has been insane for years, with prices for utter wrecks still approaching a million dollars. This has a knock-on effect for rental housing, with insufficient supply guaranteeing that rents will also go higher and higher. The Ontario NDP thinks they’ve got a silver bullet to fix the rental market: rent control! Chris Selley explains why this won’t work out the way eager would-be renters in Toronto might hope:
The NDP’s solution: rent control. MPP Peter Tabuns tabled a private member’s bill Monday that would extend limits on annual rent increases to units built after 1991 — thus closing a so-called “loophole” the Mike Harris Tories introduced in hopes people would build more new units. The Liberals followed quickly behind, with Housing Minister Chris Ballard promising “substantive rent control reform” — details to come.
You can see the attraction, politically. Robber baron landlords swoop in, cackling, forcing families onto the streets and auctioning off their homes, literally, to the highest bidder. The government can stop it. Why won’t the government stop it?
No doubt there are some very sympathetic stories out there. But we in the media tend to be very good at finding those, and it’s hard not to notice the preponderance of “victims” who could afford very high rent in the first place, and didn’t do their homework with respect to rent control or the lack thereof. A typical example: CBC introduced us to a 32-year-old who was paying $1,650 a month for a tiny one-bedroom condo, only to be sent couchsurfing by a whopping $950 increase.
[…]
The fact is, rent control would largely help high-end renters in a high-end market. The vast majority of units that aren’t rent controlled are condos. In October, CMHC pegged the condo-over-apartment rental premium in the GTA at 46 per cent for one-bedrooms, 54 per cent for two-bedrooms and 65 per cent for three-bedrooms.
The real challenge these days is finding an apartment, period: the vacancy rate in October was 1.3 per cent. Critics say the “loophole” didn’t actually incentivize building rental apartments, but closing the “loophole” certainly won’t. Indeed, it’s tough to see how it would accomplish much except transferring money from unit owners to their tenants. Many will like that idea on principle — but if owners can’t rent to the highest bidder, they are unlikely to suddenly rent for less to the youngest, most disadvantaged and most vulnerable people rent control ostensibly helps.
If you want central Toronto to be a more affordable place to live, you need to figure out how to boost supply. There are lots of different ideas out there. It’s a topic of constant discussion at City Hall and Queen’s Park alike. Rent control is nothing but a political distraction.
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QotD: The Economist
When I was living in a very remote part of the world I used to read The Economist from cover to cover, though it arrived two months late (communications in those days were not yet instantaneous). It made me feel that I was well-informed, if only in retrospect, despite my isolation. It was my window on the world.
Even then, though, I thought that it was dull and self-congratulatory, characterizing itself as of “the extreme centre.” I noticed that its reports at the front did not always coincide with the economic data at the back and that its prognostications were frequently belied by events — as, of course, most people’s prognostications are. Nevertheless, it managed to convey the impression that the disparities, insofar as they acknowledged them at all, were the fault of the events rather than of The Economist, and that the world had a duty to be as The Economist said it was and as it would be. The anonymity of the articles was intended to create the illusion that the magazine spoke from nothing so vulgar as a perspective, but rather from some Olympian height from which only the whole truth and nothing but the truth could be descried. It is the saving grace of every such magazine that no one remembers what he read in it the week before. Only by the amnesia of its readers can a magazine retain its reputation for perspicacity.
I found its style dull, too. How was it that correspondents from Lima to Limassol, from Cairo to Kathmandu, wrote in precisely the same fashion, as if everything that happened everywhere was fundamentally the same? Walter Bagehot, son-in-law of the founder of The Economist and its most famous editor, was a brilliant prose stylist and a wonderfully witty literary critic, among many other things; but The Economist has long been about as amusing as a speech by David Cameron. Its prose was the literary equivalent of IKEA furniture, prefabricated according to a manual of style; it tried to combine accessibility with judiciousness and arrived only at portentousness.
Who now reads it, and what for? I suppose there is a type of functionary who does not want to be caught out in ignorance of the latest political developments in Phnom Penh, or the supposed reasons for the latest uprising in Ouagadougou. The Economist is intellectual seriousness for middle management and MBAs. To be seen with it is a sign of belonging to, and of identifying with, a certain caste.
Theodore Dalrymple, “From Boring to Baffling”, Taki’s Magazine, 2015-08-01.
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March 20, 2017
Basic Facts of Wealth
Published on 5 Jan 2016
We know that there are rich countries, poor countries, and countries somewhere in between. Economically speaking, Japan isn’t Denmark. Denmark isn’t Madagascar, and Madagascar isn’t Argentina. These countries are all different.
But how different are they?
That question is answered through real GDP per capita—a country’s gross domestic product, divided by its population.
In previous videos, we used real GDP per capita as a quick measure for a country’s standard of living. But real GDP per capita also measures an average citizen’s command over goods and services. It can be a handy benchmark for how much an average person can buy in a year — that is, his or her purchasing power. And across different countries, purchasing power isn’t the same.
Here comes that word again: it’s different.
How different? That’s another question this video will answer.
In this section of Marginal Revolution University’s course on Principles of Macroeconomics, you’ll find out just how staggering the economic differences are for three countries — the Central African Republic, Mexico, and the United States.
You’ll see why variations in real GDP per capita can be 10 times, 50 times, or sometimes a hundred times as different between one country and another. You’ll also learn why the countries we traditionally lump together as rich, or poor, might sometimes be in leagues all their own.
The whole point of this? We can learn a lot about a country’s wealth and standard of living by looking at real GDP per capita.
But before we give too much away, check out this video — the first in our section on The Wealth of Nations and Economic Growth.
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March 16, 2017
Words & Numbers: Blocked by a State’s Wall of Taxes
Published on 15 Mar 2017
This week, James & Antony discuss the case of Connecticut’s budget shortfall. The state hopes to solve their financial problems by raiding the retirement accounts of previous Connecticut government employees who have moved out of the state, and take 30% of those savings. This plan would hurt retirees, break promises, and trap many people in the state based on a policy that may be illegal.
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March 15, 2017
QotD: How may I interrupt you next?
Q: What do Google, Facebook, Twitter, Apple, and Samsung all have in common?
A: Their business models involve interrupting you all day long.
Individually, each company’s interruptions are trivial. You can easily ignore them. But cumulatively, the interruptions from these and other companies can be crippling.
In the economy of the past, companies made money by being useful to customers. Now the biggest tech companies make their money by distracting you with ads and apps and notifications and whatnot. I don’t mean to sound like an alarmist, but I think this is the reason 80% of the adults I know are medicating. People are literally being driven crazy by a combination of complexity (too many choices) and the Interruption Economy.
There are days when my brain is flying in so many directions that I have to literally chant aloud what I need to do next in order to focus.
[…]
I’m wondering if you have as many distractions in your life. And if you do, can the chanting help you too? The next time you have a boring task that you know will be subject to lots of interruptions, try the chanting technique and let me know how it goes. It probably won’t cure your ADHD but it might help you ignore the tech industry’s distractions until you get your tasks done.
Bonus question: The economy has evolved from “How can I help you?” to “How can I distract you?” Can that trend lead anywhere but mass mental illness?
My hypothesis, based on observation alone, is that the business model of the tech industry, with its complexity, glut of options, and continuous interruptions are literally driving people to mental illness.
Scott Adams, “The Interruption Economy”, Scott Adams Blog, 2015-07-07.
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March 13, 2017
QotD: The legacy of nineteenth century intellectualism
In the Nineteenth Century, intellectuals raised the argument that Western Civilization was wrong about all its major conclusions, from Christianity to Democracy to Capitalism, and that a rational system of scientific socialism should and would correct these errors and replace them.
This, over the next hundred years, was attempted, with the result that in a single generation the socialists and communists and national socialists of various stripes had killed more people and wrought more ruin than all world religions combined during all the previous generations of history.
Meanwhile, the visual arts were reduced to aberrant rubbish not merely ugly and untalented, but objectively indistinguishable from the work of schizophrenics; literature reduced to porn and tales of failure and decay; science was reduced from an honest and objective pursuit of truth to a whorish tool servicing political ends, particularly the ends of environmentalist hysterics, but creeping into other areas; universities degenerated from bastions of learning protected by traditions of academic freedom to the foremost partisans in favor of speech codes and political correctness; family life was and continues to be assaulted; abortion continues to carry out a slow and silent genocide of negro babies, girl babies, and other unwanted humanoids; law enforcement has been redirected from protecting the innocent because they are innocent to protecting the guilty because they are guilty; the Fair Deal and New Deal of the socialist philosophy at its height of intellectual respectability did nothing but prolong what should have been a ten month market correction into a Great Depression that lasted ten years; Welfare programs encouraged, exacerbated, and created a permanent and unelevatable underclass in America, ruining the very lives the programs were alleged to help; Affirmative Action has made race-hatred, accusations of racism, and race-baiting a permanent part of American life, despite that no less racist nation ever has nor ever could exist.
So the Left has not only failed in everything they attempted, and failed at every promise they made, they failed in an immense, astonishing, unparalleled, and horrifying way, a way so deep and so vast and so gross as to never have been seen before in history nor ever imagined before, not even by science fiction writers. Even Orwell did not foretell of a time when men would voluntarily adopt Newspeak and Doublethink and all the apparatus of oppression, freely and without coercion. Even he, the most famous writers of dystopia of all time, could not imagine the modern day. The failure of the Left is indescribable: one can only grope for words like ‘awe-inspiring’ or ‘astronomical’ to express the magnitude. If Lot’s wife were to look steadily at what the Left has done, she would turn to a pillar of salt, so horrifying, so overwhelming, so dazzling is the hugeness of failure.
Now, when your prediction and worldview and way of life and philosophy turns out to be an utter failure of epic, nay, apocalyptic proportions, you have one of two choices. The honest choice is to return to the drawing board of your mind, and recalculate your ideas from their assumptions, changing any assumptions that prove false to facts.
Pardon me. I have to stop typing for a moment. The idea of a Leftwinger actually doing this honest mental act is so outrageous, that I am overcome by a paroxysm of epileptic laughter, and must steady myself ere I faint.
John C. Wright, “Unreality and Conformity of the Left”, Everyjoe, 2015-07-05.
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March 9, 2017
Words & Numbers: Women Prosper When Markets Are Free
Published on 8 Mar 2017
This week, in honor of International Women’s Day, Antony & James discuss the strong correlation between economic freedom and gender equality found across the world. They argue that if you want to see a world of increasing equality and opportunity for women, you also want to free the economy from central planning and control.
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March 5, 2017
The political Trojan Horse of “Pigouvian taxes”
Warren Meyer used to be quite positive about the introduction of Pigouvian taxes, but recently his opinion has changed:
Here is the Wikipedia definition of a Pigovian tax:
A Pigovian tax (also spelled Pigouvian tax) is a tax levied on any market activity that generates negative externalities (costs not internalized in the market price). The tax is intended to correct an inefficient market outcome, and does so by being set equal to the social cost of the negative externalities. In the presence of negative externalities, the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to over-consumption of the product. An often-cited example of such an externality is environmental pollution.
The Left often tries to justify new taxes based on their being Pigovian taxes. The classic example is a carbon tax — it is claimed there is a social cost to carbon-based fuel combustion (e.g. CO2 production and resulting global warming) that is not taken into account by market prices. By adding the tax, these other costs can be taken into account, likely raising the price of these fuels and thus both reducing their use and providing a higher price umbrella for alternatives.
For years, I accepted these arguments at face value. I might argue with them (for example, I think that the Left has tended to spot 10 of the last 2 true negative externalities), but I accepted that they really believed in the logic of the Pigovian tax. I am now becoming convinced that I was wrong, that the Left’s support of Pigovian taxes is frequently a front, a way of putting a more palatable face on what is really a naked grab for more taxpayer money by public officials.
Soon after discovering the concept of Pigouvian taxes, I suspected that — even if the economics were sound — no human government was going to implement such a tax in the pure form: there would always be “good reasons” to make the new tax non-revenue-neutral, because once a revenue stream has been established, it’s unlikely the government will actually shut it down afterwards. I have yet to be disappointed in this expectation.
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Splitting GDP
Published on 21 Nov 2015
In the last three videos, you learned the basics of GDP: how to compute it, and how to account for inflation and population increases. You also learned how real GDP per capita is useful as a quick measure for standard of living.
This time round, we’ll get into specifics on how GDP is analyzed and used to study a country’s economy. You’ll learn two approaches for analysis: national spending and factor income.
You’ll see GDP from both sides of the ledger: the spending and the receiving side.
With the national spending approach, you’ll see how gross domestic product is split into three categories: consumption goods bought by the public, investment goods bought by the public, and government purchases.
You’ll also learn how to avoid double counting in GDP calculation, by understanding how government purchases differ from government spending, in terms of GDP.
After that, you’ll learn the other approach for GDP splitting: factor income.
Here, you’ll view GDP as the total sum of employee compensation, rents, interest, and profit. You’ll understand how GDP looks from the other side — from the receiving end of the ledger, instead of the spending end.
Finally, you’ll pay a visit to FRED (the Federal Reserve Economic Data website) again.
FRED will help you understand how GDP and GDI (the name for GDP when you use the factor income approach) are used by economists in times of economic downturn.
So, buckle in again. It’s time to hit the last stop on our GDP journey.
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February 28, 2017
Outbreak of World War 1 – A Banker’s Perspective I THE GREAT WAR Special
Published on 27 Feb 2017
The classic narrative of the outbreak of World War 1 is that everyone saw it coming and was awaiting it with patriotic fervor. But studying the people that profited most from a war, the bankers, that idea is definitely challenged.
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QotD: “Mr. Keynes’ excellent little book”
Interestingly, Mussolini found much of John Maynard Keynes’s economic theories consistent with fascism, writing: “Fascism entirely agrees with Mr. Maynard Keynes, despite the latter’s prominent position as a Liberal. In fact, Mr. Keynes’ excellent little book, The End of Laissez-Faire (l926) might, so far as it goes, serve as a useful introduction to fascist economics. There is scarcely anything to object to in it and there is much to applaud.”
After the worldwide Great Depression, Mussolini became more vocal in his claims that fascism explicitly rejected the capitalist elements of economic individualism and laissez-faire liberalism. In his “Doctrine of Fascism,” Mussolini wrote: “The Fascist conception of life accepts the individual only in so far as his interests coincide with the State. . . . Fascism reasserts the rights of the state. If classical liberalism spells individualism, Fascism spells government.” In his 1928 autobiography, Mussolini made clear his dislike for liberal capitalism: “The citizen in the Fascist State is no longer a selfish individual who has the anti-social right of rebelling against any law of the Collectivity.”
Lawrence K. Samuels, The Socialist Economics of Italian Fascism, quoted by Perry de Havilland in “Mussolini admired ‘Mr. Keynes’ excellent little book'” at Samizdata, 2015-07-08.
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February 27, 2017
Real GDP Per Capita and the Standard of Living
Published on 20 Nov 2015
They say what matters most in life are the things money can’t buy.
So far, we’ve been paying attention to a figure that’s intimately linked to the things money can buy. That figure is GDP, both nominal, and real. But before you write off GDP as strictly a measure of wealth, here’s something to think about.
Increases in real GDP per capita also correlate to improvements in those things money can’t buy.
Health. Happiness. Education.
What this means is, as real GDP per capita rises, a country also tends to get related benefits.
As the figure increases, people’s longevity tends to march upward along with it. Citizens tend to be better educated. Over time, growth in real GDP per capita also correlates to an increase in income for the country’s poorest citizens.
But before you think of GDP per capita as a panacea for measuring human progress, here’s a caveat.
GDP per capita, while useful, is not a perfect measure.
For example: GDP per capita is roughly the same in Nigeria, Pakistan, and Honduras. As such, you might think the three countries have about the same standard of living.
But, a much larger portion of Nigeria’s population lives on less than $2/day than the other two countries.
This isn’t a question of income, but of income distribution — a matter GDP per capita can’t fully address.
In a way, real GDP per capita is like a thermometer reading — it gives a quick look at temperature, but it doesn’t tell us everything.It’s far from the end-all, be-all of measuring our state of well-being. Still, it’s worth understanding how GDP per capita correlates to many of the other things we care about: our health, our happiness, and our education.
So join us in this video, as we work to understand how GDP per capita helps us measure a country’s standard of living. As we said: it’s not a perfect measure, but it is a useful one.
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February 23, 2017
Words & Numbers: The CBO Can’t Count
Published on 22 Feb 2017
In this episode, Dr. Antony Davies, Professor of Economics of Duquesne University in Pittsburgh, and Dr. James R. Harrigan, Senior Research Fellow at Strata, in Logan, Utah discuss the way the Congressional Budget Office works, and outline its history of failure at accurately forecasting increases in the national debt.
Find out more about the CBO and debt projections here:
https://fee.org/articles/the-congressional-budget-office-cant-countand here:
http://www.huffingtonpost.com/entry/58a0810be4b0e172783a9daaPlus, check out this great 360 Video from Learn Liberty with Antony Daves that helps put the massive scale of the current US Federal debt into perspective: https://www.youtube.com/watch?v=ErUZjM16r1M
And track the National Debt in real time here:
http://www.usdebtclock.org/
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February 19, 2017
Nominal vs. Real GDP
Published on 19 Nov 2015
“Are you better off today than you were 4 years ago? What about 40 years ago?”
These sorts of questions invite a different kind of query: what exactly do we mean, when we say “better off?” And more importantly, how do we know if we’re better off or not?
To those questions, there’s one figure that can shed at least a partial light: real GDP.
In the previous video, you learned about how to compute GDP. But what you learned to compute was a very particular kind: the nominal GDP, which isn’t adjusted for inflation, and doesn’t account for increases in the population.
A lack of these controls produces a kind of mirage.
For example, compare the US nominal GDP in 1950. It was roughly $320 billion. Pretty good, right? Now compare that with 2015’s nominal GDP: over $17 trillion.
That’s 55 times bigger than in 1950!
But wait. Prices have also increased since 1950. A loaf of bread, which used to cost a dime, now costs a couple dollars. Think back to how GDP is computed. Do you see how price increases impact GDP?
When prices go up, nominal GDP might go up, even if there hasn’t been any real growth in the production of goods and services. Not to mention, the US population has also increased since 1950.
As we said before: without proper controls in place, even if you know how to compute for nominal GDP, all you get is a mirage.
So, how do you calculate real GDP? That’s what you’ll learn today.
In this video, we’ll walk you through the factors that go into the computation of real GDP.
We’ll show you how to distinguish between nominal GDP, which can balloon via rising prices, and real GDP—a figure built on the production of either more goods and services, or more valuable kinds of them. This way, you’ll learn to distinguish between inflation-driven GDP, and improvement-driven GDP.
Oh, and we’ll also show you a handy little tool named FRED — the Federal Reserve Economic Data website.
FRED will help you study how real GDP has changed over the years. It’ll show you what it looks like during healthy times, and during recessions. FRED will help you answer the question, “If prices hadn’t changed, how much would GDP truly have increased?”
FRED will also show you how to account for population, by helping you compute a key figure: real GDP per capita. Once you learn all this, not only will you see past the the nominal GDP-mirage, but you’ll also get an idea of how to answer our central question:
“Are we better off than we were all those years ago?”
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