Quotulatiousness

January 14, 2017

Mad Max for PM!

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

Conservative leadership candidate Maxime Bernier gets an unusually even-handed profile from the CBC:

Bernier’s life is a moveable banquet of rubber chicken, and shaking grimy, anonymous hands, and pretending great interest in everyone, trying all the while to turn the discussion to Maxime Bernier. And perhaps asking for some money while he’s at it.

Actually, that’s unfair. What Bernier mostly turns the discussion to is his ideas.

He’s libertarian, to the extent that it’s possible to be a libertarian and seek high office in a country that was built on protectionism and entitlement and government being the answer to everything.

He advocates the end of quotas and supply management for dairy, poultry and eggs. Oh, and maple syrup. Most Canadian politicians — let alone MPs representing rural Canada like Bernier — prefer to leave such topics undiscussed.

He wants to abolish interprovincial trade barriers. Stopping companies from growing into other Canadian jurisdictions, or stopping workers from travelling between provinces, he characterizes as “foolish,” “doubly foolish” and “ridiculous.”

Go ahead and argue with that.

Bernier wants an end to what he calls “corporate welfare,” his term for governments using tax money to pick winners, such as Bombardier and General Motors, and letting losers struggle with market forces.

If you’ve been reading the blog for a while, it’ll come as no surprise that Bernier is far and away my preferred choice for Tory leader.

January 13, 2017

QotD: Markets and politics

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

Markets adapt to political changes, and the hierarchy of values that distinguishes between an hour’s worth of warehouse management, an hour’s worth of composing poetry, an hour’s worth of brain surgery, and an hour’s worth of singing pop songs is not going to change because a politician says so, or because a group of politicians says so, or because 50 percent + 1 of the voters say so, or for any other reason. To think otherwise is the equivalent of flat-earth cosmology. In the long term, people’s needs and desires are what they are; in the short term, you can cause a great deal of chaos in the economy and you can give employers additional reasons to automate rote work. But you cannot make a fry-guy’s labor as valuable as a patent lawyer’s by simply passing a law.

This is not a matter of opinion — that is how the world actually works. One of the many corrosive effects of having a political apparatus and a political class dominated by lawyers is that the lawyerly conflation of opinion with reality becomes a ruling principle. Lawyers and high-school debaters (the groups are not alien to one another) operate in a world in which opinion is reality: If you convince the jury or the debate judges that your argument is superior, or if you can get them to believe that your position is the correct one, then you win, and the question of who wins is the most important one if you are, e.g., on trial for murder. But if you shot that guy you shot that guy, regardless of what the jury says — facts are facts. Galileo et al. were right (or closer to right) about the organization of the solar system than were Fra Hieronimus de Casalimaiori and the Aristotelians, and the fact that Galileo lost at trial didn’t change that.

Kevin D. Williamson, “Bernie Sanders’s Dark Age Economics”, National Review, 2015-05-27.

January 9, 2017

QotD: The wider effects of raising the minimum wage

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

When the minimum wage goes up, owners do not en masse shut down their restaurants or lay off their staff. What is more likely to happen is that prices will rise, sales will fall off somewhat, and owner profits will be somewhat reduced. People who were looking at opening a fast food or retail or low-wage manufacturing concern will run the numbers and decide that the potential profits can’t justify the risk of some operations. Some folks who have been in the business for a while will conclude that with reduced profits, it’s no longer worth putting their hours into the business, so they’ll close the business and retire or do something else. Businesses that were not very profitable with the earlier minimum wage will slip into the red, and they will miss their franchise payments or loan installments and be forced out of business. Many owners who stay in business will look to invest in labor saving technology that can reduce their headcount, like touch-screen ordering or soda stations that let you fill your own drinks.

These sorts of decisions take a while to make. They still add up, in the end, to deadweight loss — that is, along with a net transfer of money from owners and customers to employees, there will also simply be fewer employees in some businesses. The workers who are dropped have effectively gone from $9 an hour to $0 an hour. This hardly benefits those employees. Or the employee’s landlord, grocer, etc.

There are secondary effects beyond the employment market too. Proponents of a higher wage are claiming that this will boost the local economy by putting more money into the pockets of workers. This is the same sort of argument you frequently hear for the construction of massive new sports complexes. But of course, the money has to come from someone else’s pocket — the customer and the employer. What were those people doing with it? If the answer is “buying stuff from Amazon,” then maybe diverting more money to wages is a net gain for the Los Angeles economy. But if the answer is mostly “buying stuff produced in LA” — for example, paying rent, or buying services performed by low-wage workers — then this is like trying to get rich by picking your own pocket.

There’s no question that the wage increase will transfer money around within the economy — out of the pockets of commercial landlords, for example, and into the pockets of folks who own real estate in low-rent districts. But little evidence has so far been offered that any boost in local spending will cancel out the deadweight loss, much less exceed it.

Megan McArdle, “$15 Minimum Wage Will Hurt Workers”, Bloomberg View, 2015-05-20.

January 6, 2017

Venezuela’s journey from the “Bolivarian Revolution” to “Zimbabwean levels of hunger and inflationary poverty”

Filed under: Americas, Economics, Government — Tags: , , , , , — Nicholas @ 02:00

Jack Staples-Butler on the moral accountability for outside supporters (particularly the British left) of what has turned into a huge humanitarian disaster in Venezuela:

DENIAL in the face of catastrophic failure of one’s ideas is a predictable reaction from a believer, as per Leon Festinger’s theory of cognitive dissonance reduction in response to the failure of one’s beliefs. Denial in the face of shame for one’s actions is an experience well-studied by psychologists and criminologists. One 2014 study summarises the role of ‘shame’ in creating both denial of responsibility and recidivism among offenders:

    “Feelings of shame… involve a painful feeling directed toward the self. For some people, feelings of shame lead to a defensive response, a denial of responsibility, and a need to blame others — a process that can lead to aggression.”

Combining both faces of the phenomenon of denial is the behaviour of the supporters, apologists and promoters of the ‘Bolivarian Revolution’, the late Hugo Chávez and the PSUV regime in Venezuela, and their response to the present state of the country. Humanitarian catastrophe of an apocalyptic scale is now unfolding in the most oil-rich state in the world. The magnitude of human suffering is indescribable. The scenes of bread queues and shortages familiar to Eurozone-crisis Greece are long since surpassed. Venezuela has become a ‘Starvation State’ which “today drowns in a humanitarian crisis”, with lawless cities and hunger for the majority. It extends beyond humans, as the country’s pets are left in skeletal starvation and the zoos of Venezuela become graveyards of wild and endangered animals. […]

The response of the Venezuelan government to a crisis entirely of its own making has been systemic and organised psychological denial of its own, and particularly to externalise blame through conspiracy theories. Fantasies of ‘economic warfare’ waged by ‘hoarders’ led by the United States are played out in government seizures of foodstuffs and crippling price controls. The most disturbing recent development is the prospect of Venezuelans becoming a population of forced labourers in government-run agricultural projects, a solution that would take Venezuela from Zimbabwean levels of hunger and inflationary poverty to Cambodian levels of state-led starvation.

H/T to Natalie Solent for the link.

January 5, 2017

Thomas Sowell

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

David Warren on the recently announced retirement of economist Thomas Sowell:

Born in the rural poverty of North Carolina, raised in Harlem, he remained personally acquainted with the fate of his race. A disciplined and unexciteable controversialist, he rose closest to exhibiting passion when discussing, for instance, the destruction of the black family by the Great Society of Lyndon Baines Johnson — how it arrested the social and economic advancement blacks had been making by their own efforts to overcome the monstrous history of slavery. By its “helping hand” the government rewarded unwed motherhood, punished enterprise, and promoted crime. In addition to family, it undermined religion, and finally helped install the abortion mills which disproportionally reduce the black population. And all of this by legislation drumrolled from the start with pseudo-Christian moral posturing.

Sowell could understand this through the economic analysis of moral hazard. Reward people for making irresponsible life choices, for discarding prudence and embracing victimhood and dependency — the result may be predicted. The question whether the policies were the product of invincible stupidity or demonic inspiration is moot: for stupidity is among the devil’s excavating tools. He is a master policy analyst, to whom men are merely statistics to be crunched; and to the stupid man he proposes the job-ready shovel, by which to dig his own grave.

QotD: Warriors and (mere) merchants

Filed under: Economics, Europe, Greece, History, Quotations — Nicholas @ 01:00

We know almost nothing of the merchants who made ancient Greece rich enough to spawn an unprecedented culture, but we know lots about the deeds of those who squandered that wealth in war. “The history of antiquity resounds with the sanguinary achievements of Aryan warrior elites,” wrote the historian of antiquity Thomas Carney. “But it was the despised Levantines, Arameans, Syrians, and Greeklings who constituted the economic heroes of antiquity.”

Matt Ridley, “Waterloo or railways”, Matt Ridley Online, 2015-06-18.

January 4, 2017

QotD: The utility of money

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

As of yesterday afternoon, a nonstop round-trip flight from New York City to Los Angeles on Independence Day weekend cost $484. That the price is so low is an incredible story in itself, one that is more important than most of what our children are taught in their history classes and one that we should not fail to appreciate, but it is a subject for another day. Consider, though, that that $484 is a messy number; it isn’t an even $500 or rounded to $480 or $485. Messy numbers are a sign of real calculation, and they are the opposite of political numbers: the first 100 days in office, the five-year plan, the $15 minimum wage.

That $484 is easily expressed in non-U.S. dollar contexts: €445.08, £ 314.56, ¥ 5,9573.87, 2.0349 Bitcoin. (Damn!) On the commodities market, that’s 745.54 pounds of cotton or 338.5 pounds of coffee. It is 0.00000268888 of a Les Femmes d’Alger, the Pablo Picasso painting that recently set a new auction record at Christie’s.

There is no reason, in theory, that one could not buy a Picasso masterpiece and pay for it in coffee, or in coffee futures, or in barrels of West Texas Intermediate crude. But most sellers, and most buyers, prefer currency — a restaurant in Austin has a sign proclaiming that it “proudly does not accept the American Express Card, Visa, MasterCard, checks, chickens, or pesos.” Dollars do not have any inherent value; as my favorite presidential candidate, the mighty Cthulhu (“Why Vote for a Lesser Evil?”) put it, dollars are merely “pieces of green paper backed solely by religious dogma.” (Cthulhu’s fiscal policy? “He permits his devotees to collect as much paper in as many colors as they happen to like.”) Dollars have value because of the things for which we can trade them: Picasso paintings (or, ideally, paintings by some superior artist), coffee, cotton, cheeseburgers, sofa beds … checks, chickens, or pesos. This is an aspect of what in economics is known as Say’s Law, which holds that goods are paid for in goods — i.e., that we manufacture widgets or grow tomatoes or write novels because we wish to consume shoes and poached salmon and Buicks. The dollar or the euro is just a way to avoid the difficulties of trading a truckload of chickens (or a convoy of them) for Les Femmes d’Alger.

Kevin D. Williamson, “Bernie Sanders’s Dark Age Economics”, National Review, 2015-05-27.

January 1, 2017

QotD: Currency Manipulation

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

One of the critiques of any trade deal of late is that there should be penalties for countries guilty of “currency manipulation.” The concern is that countries will devalue their currency in an effort to make their own exports cheaper to other nations while making it harder for other countries to export back to them. As an example, if the Chinese were to do something that cuts the value of the Yuan in half vs. the dollar, their products look very cheap to American consumers while American-produced goods suddenly look a lot more expensive to Chinese consumers.

I have two brief responses to this:

  1. I find it hilarious that anyone in the United States government, which has a Federal Reserve that has added nearly $2 trillion to its balance sheet in the service of cramming down the value of the dollar, can with a straight face accuse other nations of currency manipulation. In practice in today’s QEconomy, currency manipulation means another country is doing exactly what we are doing, but just doing it faster.
  2. As an American consumer, to such currency manipulation by other countries I say, Bring it On! If China wants to hammer its own citizens with higher prices and lower purchasing power just to subsidize lower prices for me, I am happy to let them do it. Yes, a few specific politically-connected export businesses lose revenues, but trying to prop them up is pure cronyism. Which is one reason I think Elizabeth Warren is a total hypocrite. The constituency of the poor and lower middle class she presumes to speak for are the exact folks who shop at Walmart and need very price break on everyday goods they can get. Senator Warren’s preferences for protectionist trade policies and a weak dollar will hurt these folks the most.

Warren Meyer, “Currency Manipulation”, Coyote Blog, 2015-05-26.

December 31, 2016

Signaling

Filed under: Economics — Tags: , , , — Nicholas @ 04:00

Published on 23 Sep 2015

A signal is an action that reveals information. Let’s look at higher education, for example. A large fraction of the value you receive from your degree comes on the day you earn your diploma. Your expected wages don’t increase with each class you complete along the way; instead, they spike sharply at the end when you receive your diploma. This is often referred to as the “Sheepskin Effect” because diplomas used to be printed on sheepskin.

Nobel Prize winner Michael Spence did research on this subject and found that education is valuable not necessarily because it creates valuable skills, but rather that it signals valuable skills. So how does the signal, represented by a degree, alleviate asymmetric information?

Employers don’t necessarily know how smart or skilled you are. Your degree, however, provides a credible signal of these traits and gives them more information they can use in the hiring process.

What other signals exist? We discuss examples like diamond engagement rings, why criminals tattoo their face, and why a peacock has a colorful tail. Let us know what examples you come up with in the comments.

December 27, 2016

QotD: The economics of price gouging

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

Soaring prices after a natural disaster or during extreme weather are simply, economists would say, the market’s response to changing supply and demand, as disruptions make it harder to get some things just as demand spikes (for instance, for generators, gasoline, bottled water, first aid supplies). The price increase helps cut down on marginal uses (taking a bath with your bottled water), while drawing new supply in from unaffected regions, because people there now have a strong incentive to load up supplies and go sell them in the affected area — quickly. The market is working. But the optics are terrible. Humans intuitively see price gougers as bad agents, exploiting the suffering of others. So even in the absence of price-gouging laws, businesses try to avoid raising prices under extreme conditions. Whatever they could gain in immediate revenue, they would lose more in future sales as disgusted customers walk away.

Megan McArdle, “The Price Is Right, or Uber Will Raise It”, Bloomberg View, 2015-05-19.

December 25, 2016

Repost – The market failure of Christmas

Filed under: Economics, Government — Tags: , — Nicholas @ 02:00

Not to encourage miserliness and general miserability at Christmastime, but here’s a realistic take on the deadweight loss of Christmas gift-giving:

In strict economic terms, the most efficient gift is cold, hard cash, but exchanging equivalent sums of money lacks festive spirit and so people take their chance on the high street. This is where the market fails. Buyers have sub-optimal information about your wants and less incentive than you to maximise utility. They cannot always be sure that you do not already have the gift they have in mind, nor do they know if someone else is planning to give you the same thing. And since the joy is in the giving, they might be more interested in eliciting a fleeting sense of amusement when the present is opened than in providing lasting satisfaction. This is where Billy Bass comes in.

But note the reason for this inefficient spending. Resources are misallocated because one person has to decide what someone else wants without having the knowledge or incentive to spend as carefully as they would if buying for themselves. The market failure of Christmas is therefore an example of what happens when other people spend money on our behalf. The best person to buy things for you is you. Your friends and family might make a decent stab at it. Distant bureaucrats who have never met us — and who are spending other people’s money — perhaps can’t.

So when you open your presents next week and find yourself with another garish tie or an awful bottle of perfume, consider this: If your loved ones don’t know you well enough to make spending choices for you, what chance does the government have?

December 24, 2016

The History of Paper Money – Lies – Extra History

Filed under: Economics, History — Tags: , — Nicholas @ 04:00

Published on Nov 12, 2016

James talks about our mistakes and adds additional stories and explanations for the History of Paper Money!

“Ebenezer Scrooge is underrated”

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

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.

December 23, 2016

A tribute to the real hero of It’s a Wonderful Life – Old Man Potter

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

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.

December 20, 2016

Ghostly apparitions terrorize elderly businessman at Christmas

Filed under: Books, Britain, Economics, Media — Tags: , , — Nicholas @ 02:00

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.

« Newer Posts — Older Posts »

Powered by WordPress