Published on Nov 12, 2016
James talks about our mistakes and adds additional stories and explanations for the History of Paper Money!
December 24, 2016
The History of Paper Money – Lies – Extra History
Comments Off on The History of Paper Money – Lies – Extra History
“Ebenezer Scrooge is underrated”
Last year, Tim Harford sang the praises of poor old Ebenezer:
Ebenezer Scrooge is underrated. Literature’s most notorious misanthrope gets no respect from anyone. He’s a miser, a bully and a sociopath. Only with the most strenuous pleading from three supernatural mentors does he embrace the spirit of Christmas and, in so doing, join the human race. Dickens’s story is viewed as a journey of redemption; I am not so sure.
In his original, miserly form, Scrooge actually gives us much to admire. He was a model of inadvertent benevolence. He earned vast sums and avoided spending so much as a farthing if he could help it. The economic implication of this? Regardless of Scrooge’s motives, because he spent little, everyone else enjoyed more, as surely as if Scrooge had divided his fortune and sent a few coins to everyone in the country. As the economist Steven Landsburg once wrote: “There is nobody more generous than the miser — the man who could deplete the world’s resources but chooses not to.”
[…]
It is hard for us to grasp the discrepancy between how we see the world when giving gifts and when receiving them. Recipients may appreciate cash or presents from a list and not fuss too much about expensive gifts; gift givers, in contrast, imagine that the ideal present is an expensive surprise. It isn’t. All this suggests we should probably be spending less on presents, and thinking a lot more about the presents we do buy.
Which brings us back to Scrooge himself. When he finally did decide to embrace the conventional spirit of Christmas, he didn’t waste his money on demonstrative extravagances for people whose desires he didn’t really understand. Instead, he gave three superb gifts. First, a prize turkey that he knew — thanks to a ghostly premonition — was much needed by the Cratchit family. Second, the gift of his time and attention, playing games and making merry with his nephew. Finally, he gave Bob Cratchit the greatest Christmas gift of all: a pay rise.
As I say: underrated.
Comments Off on “Ebenezer Scrooge is underrated”
December 23, 2016
A tribute to the real hero of It’s a Wonderful Life – Old Man Potter
Tom Mullen explains why Mr. Potter is the hero, rather than the villain, in the traditional Christmas-time movie, It’s a Wonderful Life:
December is upon us and that means plentiful opportunities to watch the enduring classic, It’s a Wonderful Life. Unfortunately, the overwhelming majority of viewers completely misinterpret Frank Capra’s dystopian nightmare as a heartwarming Christmas tale.
The emotional appeal of angels getting their wings is undeniable. Crying out for correction, however, are the vicious slanders regarding the film’s real hero, Henry Potter.
We first hear of Potter from George Bailey’s father, Peter Bailey, who badmouths Potter with the usual falsehoods about businessmen. But during Bailey’s envious rant, we learn something important: Henry Potter is a board member of the building and loan. We later learn Potter is, in fact, a stockholder.
That puts a somewhat different light on his subsequent motion to liquidate the business upon Peter Bailey’s death. Yes, we hear George Bailey repeating the familiar socialist tropes his father did: that Potter only wants to close the building and loan because he “can’t get his hands on it” and considers the little people cattle, etc.
But Potter responds with some rather inconvenient facts: the building and loan has been making bad business decisions, providing what we’d now call subprime loans to people who can’t pay them back.
Comments Off on A tribute to the real hero of It’s a Wonderful Life – Old Man Potter
December 20, 2016
Ghostly apparitions terrorize elderly businessman at Christmas
Tom Mullen discusses the leftist apparitions who tormented poor Mr. Ebenezer Scrooge, leaving him permanently damaged financially and intellectually:
[Scrooge’s] only weakness seems to be sentimentality towards the whiny, presumably mediocre-at-best Bob Cratchett. We know Scrooge was paying Cratchett more than anyone else was willing to or Cratchett would surely have accepted a higher-paying job to put additional funds towards curing Tiny Tim. But we really don’t have any evidence anyone else was willing to employ Cratchett at all, at any salary level. Still, we must defer to Scrooge’s judgment on this and perhaps even laud him for finding a way to employ a substandard employee without jeopardizing the firm as a whole.
Thus, all was as well as it could have been on December 23. Scrooge’s customers were happy, Bob Cratchett was at least employed, thanks to Scrooge, and Scrooge himself was as happy as he could be, considering the ingratitude with which his genius had been rewarded and all the panhandlers constantly shaking him down.
Everything changed on Christmas Eve, when Scrooge was terrorized – there really is no other word for it – by three time-traveling, left-wing apparitions. It wasn’t enough to frighten an elderly man with the mere appearance of ghosts. They took him on a trip through time, scolding him for supposed mistakes made in the past and blaming him for the misfortunes of others in the present and future. And let’s not forget the purpose of this psychological waterboarding. They are not, as Shaffer observes, pursuing Scrooge’s happiness, but his money. They are William Graham Sumner’s A & B conspiring to force C to relieve the suffering of X. Politicians A & B use the polite coercion of legislation; the spirits make use of more direct and honest threats of violence.
Their plot was successful. Scrooge awoke from his night of terror obviously out of his senses and began making one poor financial decision after another. Perhaps buying the largest turkey in the local shop could be excused on Christmas Day. But then, without any evidence of improvement in performance, he raised Bob Cratchett’s salary and promised to take on the Cratchett family’s medical expenses.
After that, we are told Scrooge was “transformed” completely, which we can only interpret to mean he no longer made the kind of decisions that had previously benefited so many. We are told Scrooge’s subsequent behavior was so foolhardy that some people laughed at him. But even this wasn’t enough to snap him out of the permanent delirium with which the spirits had inflicted him.
Comments Off on Ghostly apparitions terrorize elderly businessman at Christmas
December 14, 2016
Econ Duel: Why Is the Rent So Damn High?
Published on 13 Dec 2016
This week: Matt Yglesias and Tyler Cowen in a brand new Econ Duel.
Next week: Another Econ Duel! Scott Sumner and Larry White will take on monetary policy.
You’ve no doubt heard it before: the rent is too damn high!
In major cities across the United States, rent prices have been skyrocketing for some time. As a percentage of median income, rent is much higher for those that choose city life over suburbia.
But why are rental prices in these cities so expensive, and what can we do about it?
It’s a classic case of supply and demand: lots of people want to move to big cities because of the opportunities they afford. Naturally, they demand housing. But the supply is often short due to many factors, from geography to regulations. What does economics tell us happens when there’s a lot of demand, but not so much supply? Prices rise. As a consequence, many people are priced out of pursuing the lucrative opportunities available in major cities.
Coastal cities, like San Francisco and New York, have obvious geographical restrictions on building “out.” One way to deal with this problem is to build upwards with more skyscraper housing. This often isn’t feasible due to regulations on building heights, density, parking requirements, etc. But these regulations could be lessened or removed, allowing big cities to become denser and lowering rent prices. Lifelong city-dweller Matt Yglesias discusses this approach in this Duel.
On the other side, Tyler Cowen, who has always lived in the suburbs, argues that allowing cities to become denser may only provide a short-term solution. As more people move in, the cities become more productive with higher incomes for their inhabitants. And the rents rise again.
Of course, we’ve merely skimmed over the arguments here, and you’ll have to watch the Econ Duel to get the full picture! Check it out and let us know in the comments who you think makes a better case.
Comments Off on Econ Duel: Why Is the Rent So Damn High?
QotD: Fill-in-the-blank OECD fun
When writing about the Organization for Economic Cooperation and Development, an international bureaucracy based in Paris, my life would be simpler if I created some sort of automatic fill-in-the-blanks system.
Something like this.
The OECD, subsidized by $____ million from American taxpayers, has just produced a new _________ that advocates more power for governments over the _________ sector of the economy.
But this may not be sufficiently descriptive.
So maybe I should create a multiple choice exercise. Sort of like when students take tests and get asked to circle the most appropriate answer.
The bureaucrats at the Paris-based OECD, working in cooperation with union bosses/class-warfare advocates/other tax-free international bureaucrats/politicians, have released a new report/study/paper urging more power/control/authority for governments in order to increase regulation/taxes/spending/redistribution/intervention.
You may think I’m trying to be funny, but this is totally serious.
How else would you describe a bureaucracy that consorts and cooperates with leftist groups like Occupy Wall Street and the AFL-CIO and routinely published propaganda in favor of Obama’s agenda on issues such as global warming, government-run healthcare, so-called stimulus, and class-warfare taxation.
And never forget that American taxpayers finance the biggest chunk of this bureaucracy’s budget.
Adding insult to injury, the bureaucrats at the OECD get tax-free salaries, which makes their relentless support for higher taxes on the rest of us even more obnoxious.
Dan Mitchell, “More Statist Propaganda from the Taxpayer-Funded OECD”, International Liberty, 2015-04-12.
Comments Off on QotD: Fill-in-the-blank OECD fun
December 12, 2016
Refuting Piketty’s call for revolution, again
Tim Worstall points out that Thomas Piketty has mis-diagnosed the “problem” of rising capital:
The report shows that there were 13 OECD countries in which assets in funded pensions represented more than 50% of GDP in 2015, up from 10 in the early 2000s. Over the same period, the number of OECD countries where assets in funded private pension arrangements represent more than 100% of GDP increased from 4 to 7 countries.
We’re living longer lives these days, we’re working for fewer decades of them and thus people are rationally saving for their expected golden years. Thus capital as a percentage of GDP rises – not to produce inheritances, but to produces incomes in retirement. And rises by potentially at least more than 100% of GDP.
We can’t see that this is a problem and we most certainly cannot see that this is an argument for greater taxation of capital. Quite the reverse in fact, people saving for their old age should be encouraged, not specifically taxed.
So much for the most recent French call for revolution then, eh?
Comments Off on Refuting Piketty’s call for revolution, again
December 11, 2016
Re-negotiating NAFTA (and the Defence Production Sharing Program, too)
Ted Campbell is in favour of bringing NAFTA up-to-date and reminds us that there’s another diplomatic item that could use modernization at the same time:
In my opinion, if Prime Minister Justin Trudeau, or the next Conservative leader is really interested in restoring Canada to a leading position in real, practical, long term peacekeeping then (s)he will abandon the United Nations and, instead, turn Canada into a free trade powerhouse by dropping our remaining protectionist measures, as Maxime Bernier and Colin Robertson both advocate, and making deals with all comers. And it is important to remember that “deals” involve two sides and both sides must gain something which means that both sides probably “give” something, too, and that produces short term “losers” and it is politically important to try to “soften” the transition for those who are bound to lose in the short term. But, in the mid to long term most losses are “covered” by gains in new products and services and the utilitarian goal of “the greatest good for the greatest number” is achieved … most of the time.
One of the things Colin Robertson mentioned was shipbuilding and it leads me to consider that one of the things we want to renew if or when we must renegotiate NAFTA is the Defence development sharing agreement between Canada and the United States of America. The stated objective of the existing (since 1963) agreement are:
- To assist in maintaining the Defense Production Sharing Program at a high level by making it possible for Canadian firms to perform research and development work undertaken to meet the requirements of U.S. armed forces.
- To utilize better the industrial scientific and technical resources of the United States and Canada in the interest of mutual defense.
- To make possible the standardization and interchangeability of a larger amount of the equipment necessary for the defense of United States and Canada.
The Defence Production Sharing Program is, too often, hamstrung by US (and Canadian) protectionist measures and it needs to be brought more fully into the area of bilateral free trade. I am not suggesting that the Pentagon would ever let, say, a significant shipbuilding contract to a Canadian yard but it must be possible for Canadian shipyards and factories and service providers to bid on US defence contracts on at least a “near equal” basis and vice-versa, of course. This, free(er) trade in defence materiel and services is one area where we, North Americans, can learn from the Europeans. I am not suggesting that Canada should abandon the idea of having a national defence industrial base but, rather, that we should have a base that fits, neatly, into a larger continental base that is, somehow, connected to other allied defence production systems.
So, broadly, when (if) President elect Trump says he wants to renegotiate NAFTA we should, indeed, say “bring it on!” But we should go into negotiations with our eyes wide open, prepared to surrender some “losers,” as good bridge players do, in order to finesse some winners for ourselves.
Comments Off on Re-negotiating NAFTA (and the Defence Production Sharing Program, too)
December 8, 2016
The History of Paper Money – VI: The Gold Standard – Extra History
Published on Nov 5, 2016
Even as the use of paper money grew, ties to the gold standard remained… and remained challenging. From the First Opium War to the Great Depression, events around the world stretched the capacity of bullion based economics. So what – and who – finally abandoned it?
Comments Off on The History of Paper Money – VI: The Gold Standard – Extra History
December 7, 2016
QotD: Turning ordinary recycling into a vast revenue enhancement tool
… we know that ubiquitous RFID tags are coming to consumer products. They’ve been coming for years, now, and the applications are endless. More to the point they can be integrated with plastic products and packaging, and printed cheaply enough that they’re on course to replace bar codes.
Embedded microcontrollers are also getting dirt cheap; you can buy them in bulk for under US $0.49 each. Cheap enough to embed in recycling bins, perhaps? Along with a photovoltaic cell for power and a short-range radio transceiver for data. I’ve trampled all over this ground already; the point is, if it’s cheap enough to embed in paving stones, it’s certainly cheap enough to embed in bins, along with a short-range RFID reader and maybe a biosensor that can tell what sort of DNA is contaminating the items dumped in the bins.
The evil business plan of evil (and misery) posits the existence of smart municipality-provided household recycling bins. There’s an inductance device around it (probably a coil) to sense ferrous metals, a DNA sniffer to identify plant or animal biomass and SmartWater tagged items, and an RFID reader to scan any packaging. The bin has a PV powered microcontroller that can talk to a base station in the nearest wifi-enabled street lamp, and thence to the city government’s waste department. The householder sorts their waste into the various recycling bins, and when the bins are full they’re added to a pickup list for the waste truck on the nearest routing — so that rather than being collected at a set interval, they’re only collected when they’re full.
But that’s not all.
Householders are lazy or otherwise noncompliant and sometimes dump stuff in the wrong bin, just as drivers sometimes disobey the speed limit.
The overt value proposition for the municipality (who we are selling these bins and their support infrastructure to) is that the bins can sense the presence of the wrong kind of waste. This increases management costs by requiring hand-sorting, so the individual homeowner can be surcharged (or fined). More reasonably, households can be charged a high annual waste recycling and sorting fee, and given a discount for pre-sorting everything properly, before collection — which they forefeit if they screw up too often.
The covert value proposition … local town governments are under increasing pressure to cut their operating budgets. But by implementing increasingly elaborate waste-sorting requirements and imposing direct fines on households for non-compliance, they can turn the smart recycling bins into a new revenue enhancement channel, much like the speed cameras in Waldo. Churn the recycling criteria just a little bit and rely on tired and over-engaged citizens to accidentally toss a piece of plastic in the metal bin, or some food waste in the packaging bin: it’ll make a fine contribution to your city’s revenue!
Charles Stross, “The Evil Business Plan of Evil (and misery for all)”, Charlie’s Diary, 2015-05-21.
Comments Off on QotD: Turning ordinary recycling into a vast revenue enhancement tool
December 6, 2016
Alex & Tyler’s Economist’s Christmas
Published on 5 Dec 2016
This week: Let’s get in the holiday spirit! What would an economist do about Christmas gifts?
What do you really want for the holidays? And how can you be sure you’re giving the perfect gift to someone else?
Of course, you want to get your loved ones something they will appreciate, but you face a knowledge problem: you don’t know everything about their wants and needs. You also have an incentive problem: oftentimes people aren’t quite as careful choosing a gift for others as they would be if buying something for themselves.
We’ve all received a present that we didn’t really want. When that happens, the value that we place on the gift can be less than its cost. According to research by economist Joel Waldfogel, gift givers spend an average of $50 on gifts that recipients only value at $40. Given that Americans spend around $100 billion on Christmas gifts, we’re wasting $18-20 billion every holiday season!
Is there a solution to this costly problem? Well, you can always give cold, hard cash! Many gift recipients would prefer it. But if you know the recipient’s tastes very well, you do have the opportunity to give them a non-cash present that they’ll love and that creates value by lowering their search costs.
There are, of course, occasions where the gift of money doesn’t make sense. Perhaps you want to signal that you care in a different way, or maybe there’s a custom you want to follow. You’ll just have to risk it in these situations.
Around the holidays, there’s also a spike in charitable giving. If you face knowledge and incentive problems in giving gifts to loved ones, you can imagine that these issues increase when you’re giving to someone you’ve never met. To combat this problem, some charities, such as GiveDirectly, give cash to people in need so that they spend charitable donations however meets their needs.
The efficiency of an economist’s Christmas may feel less warm and fuzzy, but the value creation is no less generous!
Comments Off on Alex & Tyler’s Economist’s Christmas
December 5, 2016
The History of Paper Money – V: Working out the Kinks – Extra History
Published on Oct 29, 2016
The first question of paper money is not how much you can print, nor even what its value is – but who prints the money? When every bank started to print their own bank notes, it caused confusion and frustration. Enter the Central Bank.
Comments Off on The History of Paper Money – V: Working out the Kinks – Extra History
December 3, 2016
The History of Paper Money – IV: Lay Down the Law – Extra History
Published on Oct 22, 2016
What happens when you really try to put paper money doctrine into practice? And why would you put a gambler, womanizer, and fugitive criminal like the ironically named John Law in charge of running it?
Comments Off on The History of Paper Money – IV: Lay Down the Law – Extra History
December 2, 2016
India’s bold experiment in self-inflicted economic wounds
Shikha Dalmia explains why Indian Prime Minister Narendra Modi suddenly decided to kneecap his country’s money supply and cause massive economic disruption:
Modi was elected in a landslide on the slogan of “Minimum Government, Maximum Governance.” He promised to end babu raj — the rule of corrupt, petty bureaucrats who torment ordinary citizens for bribes — and radically transform India’s economy. But rather than tackling government corruption, he has declared war on private citizens holding black money in the name of making all Indians pay their fair share.
Tax scofflaw behavior is indeed a problem in India. But it is almost always a result of tax rates that are way higher than what people think their government is worth. The enlightened response would be to lower these rates and improve governance. Instead, Modi is taking his country down what Nobel-winning political economist F.A. Hayek called the road to serfdom, where every failed round of coercive government intervention simply becomes an excuse for even more draconian rounds — exactly what was happening in pre-liberalized India.
[…]
About 600 million poor and uneducated Indians don’t have bank accounts. Roughly 300 million don’t have official identification. It’s not easy to swap their soon-to-be worthless cash, which is a catastrophe given that they live hand to mouth. It is heartbreaking to see these people lined up in long queues outside post offices and banks, missing days and days of work, pleading for funds from the very bureaucrats from whose clutches Modi had promised to release them.
Modi hatched his scheme in complete secrecy, without consulting his own economic advisers or the Parliament, lest rich hoarders catch wind and ditch their cash holdings for gold and other assets. Hence, he could not order enough new money printed in advance. This is a massive problem given that about 90 percent of India’s economic transactions are in cash. People need to be able to get money from their banks to meet basic needs. But the government has imposed strict limits on how much of their own money people can withdraw from their own accounts.
[…]
This is not boldness, but sheer conceit based on the misguided notion that people have to be accountable to the government, rather than vice versa. Over time, it will undermine the already low confidence of Indians in their institutions. If Modi could unilaterally and so suddenly re-engineer the currency used by 1.1 billion people, what will he do next? This is a recipe for capital flight and economic retrenchment.
The fear and uncertainty that Modi’s move will breed will turn India’s economic clock back to the dark times of pre-liberalized India — not usher in the good times (aache din) that Modi had promised.
Comments Off on India’s bold experiment in self-inflicted economic wounds
