Quotulatiousness

October 21, 2015

The two types of statists

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

Another post I stashed away, intending to blog and then somehow forgot … Dan Mitchell on the two main varieties of statist supporters:

At the risk of oversimplifying, there are two types of statists.

The first type is generally insincere and simply views bigger government and increased dependency as a strategy to obtain and preserve political power. Most inside-the-beltway leftists in Washington are in this category.

The second type genuinely cares about the less fortunate but makes the mistake of thinking that good intentions somehow lead to good results. You could call these people the Pope Francis leftists.

As you might imagine, there’s very little hope of persuading the first category of statists. You could show them all the data and evidence in the world, for instance, that a flat tax would boost prosperity, and they’ll simply shrug and tell you to jump in a lake because genuine tax reform would reduce the power and influence of Washington’s political elite.

But the second group of statists should be persuadable. That’s why I share so many comparisons of nations with smaller government and freer markets versus countries with bigger government and more intervention. I want open-minded folks on the other side to see how good policy leads to better economic performance, particularly since the poor will be big beneficiaries. That should be compelling, especially when combined with the data on how the welfare state simply traps poor people in government dependency.

October 20, 2015

The economics of wind power in the UK

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

James Delingpole on the sleight-of-hand employed by the media to pretend that wind power is far more economical than it really is:

Wind power now UK’s cheapest source of electricity – but the Government continues to resist onshore turbines.

That was the headline in the Independent this time last week. I’m not suggesting for a moment that you’re an Independent reader but suppose for a moment you were: what do you think your reaction might have been?

Mine, I suspect, would have been not dissimilar to that of the eight thousand readers who decided it was worth sharing – and indeed that of the two or three who used it to needle sceptics on Twitter.

“Take that, evil deniers!” I would have gone in my smug, Independent-reading way. And it would never have occurred to me to question the premise for a number of reasons.

1. It was written by the Environment Editor on a reasonably well-respected national newspaper. And people with responsible jobs like that don’t make shit up, do they?

2. The data came from Bloomberg New Energy Finance – “the world’s leading provider of information on clean energy to investors, energy companies and governments.” Well if they say so it must be true. Bloomberg – they’re kind of a big deal in financial information, right?

3. It wasn’t just the left-leaning Independent that ran with the story. The story also appeared in the Guardian which, though also pretty parti-pris where environmental issues are concerned, does tend to pride itself on its accuracy and integrity (relative, say, to its arch-enemy the Murdoch press) and its willingness to rectify even the slightest mistake in its Corrections section. And more significantly, it ran in the unashamedly free-market City Am which, you might have imagined, would never dream of writing a headline like “Wind power now the cheapest electricity to produce in the UK as the price of renewable energy continues to drop” without first checking to see whether the press release was accurate.

Well, since the story ran, Paul Homewood has been doing a bit of homework. And guess what? Yes, that’s right. Wind power isn’t the cheapest source of electricity in the UK or anywhere else in the world. Not by a long chalk. It’s at least twice the price, for example, of electricity generated from that hated but remarkably cost-effective fossil fuel, gas.

October 19, 2015

Maximizing Profit under Competition

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

Published on 18 Mar 2015

A company in a competitive environment does not control prices. So the key to maximizing profit is choosing how much to produce. To do that, we need to factor in the costs involved in production. So what exactly are the costs? How do these costs influence how you maximize profit? And, remember, if you want to think like an economist, you must factor in opportunity cost!
In this video, we define profit, including how to calculate total revenue and total cost. We also go over fixed costs, variable costs, marginal revenue, and marginal cost.

October 16, 2015

Fair Trade: Does It Help Poor Workers? (Everyday Economics 7/7)

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

Published on 8 Jul 2015

Elizabeth, an Everyday Economics viewer, asks: “How does the purchase of fair-trade goods affect wages in developing countries?”

Great question! The “fair trade” movement has become popular as a proposed way to increase living standards in developing countries. In this video, we look at whether fair trade does just that.

For a good to be considered “fair trade” it must meet various requirements developed by a handful of fair trade organizations. In the developing world, who is better positioned to meet these fair trade requirements — large producers in wealthier countries or small producers in poorer countries? To answer this question, we take a look at the the example of fair trade coffee produced in both Costa Rica and Ethiopia. How does fair trade affect wages and overall quality of life in those countries?

And, if fair trade isn’t the best way to improve living standards in developing countries, how else can we maximize employment options and well-being for poor workers? This question is at the core of an entire branch of economics — Development Economics. To learn more, check out MRU’s Development Economics course.

October 14, 2015

Introduction to the Competitive Firm

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

Published on 18 Mar 2015

How does a company really behave? We tend to assume profit — the bottom line — is the main motivation for a firm’s actions. For most firms most of the time, this is a good assumption, especially in a competitive market. With this video, you will explore how a company maximizes profit in a competitive environment where there are many buyers and sellers.

This idea comes with a few surprises. Does a company really control what price it sets? Or does the market determine the price? Here’s a clue. If you owned an oil well, even your mother wouldn’t buy your oil if she could get the same oil somewhere else for less money. Watch and find out why.

October 9, 2015

Are We Better Off if We Buy Local? (Everyday Economics 6/7)

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

Published on 24 Jun 2015

In this Everyday Economics video, Don Boudreaux addresses one of your viewer-submitted questions: “Is everyone better off if we buy local?”

In a modern economy, it’s hard to say that anything is truly “local.” Even an apple grown at a nearby farm isn’t a “local” good — everything from the fertilizer used to feed the trees to the wooden crates that carry the apples to market are likely made elsewhere. And, the profits the farmer makes from selling his apples are likely not spent locally — for instance, he may buy a tractor or supplies manufactured far away.

This video also takes a look at what would happen if you could direct your money locally. Would it benefit the local economy? How many businesses could survive solely on local business? What happens to specialization and productivity when we shrink markets? What about prices and variety of goods? Let’s take a look.

October 7, 2015

The enigma of the Trans-Pacific Partnership

Filed under: Economics — Tags: , , , , , — Nicholas @ 05:00

We don’t know what’s in it, so it could be a multi-national version of “we have to pass it to find out what’s in it”. Megan McArdle manages to raise one cheer for the agreement:

I’ve spent the morning reading about the Trans-Pacific Partnership. I went in prepared to deliver a column full of details, winners and losers, strong opinions about the good provisions and the bad. But what really comes to mind is a dismal thought: “Is this the best we can do?”

Oh, yes, I know the statistics. Forty percent of the world’s economy. Thousands of tariffs falling. I know the opposition points too, about giveaways to business, intellectual property rules, outsourcing jobs. No one is talking about the larger story, though, which is that the biggest trade news in a decade involves a regional deal of relatively limited impact.

It was not always thus. When I was a fledgling journalist, a wee slip of a thing, we economics writers looked to major global trade negotiations to advance the cause of freer markets, and not incidentally, the material progress of mankind. We looked down on regional side-deals because they were such weak tea compared with the robust brew of a global agreement. Regional deals distorted the flow of trade, encouraging people not to exploit comparative advantage and production capabilities, but rather to seek the best combination of tariff rules from among competing regional frameworks. I have heard arguments that such deals, by distorting trade and weakening the pressure to make global deals, were actually worse than doing nothing. Indeed, I may have made such arguments.

You don’t hear those arguments any more, and that’s because we free-traders have largely given up on global trade agreements. The Doha round of World Trade Organization talks collapsed in the face of European agricultural protectionism and intransigence among countries with large numbers of subsistence farmers. Nativism, protectionism, nationalism seem to be rising as a political force in many countries. Global trade volumes are looking anemic. In this climate, regional agreements seem attractive, in much the same way that the remaining bar patrons assume a winsome glow around closing time.

How have things come to such an unpretty pass?

A Deeper Look at Tradeable Allowances

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

Published on 18 Mar 2015

Since the passage of the Clean Air Act, SO2 emissions have decreased by 35%. Part of this is due to tradable allowances, which created a market solution to the external costs of SO2 emissions. In this video, we look at the lessons of tradable allowances for SO2 and see if a similar market-based solution could work to decrease other pollutants, such as CO2.

October 6, 2015

Puerto Rico’s minimum wage experiment

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

J.R. Ireland describes what happened to Puerto Rico’s economy when the minimum wage was raised to the mainland level by congress in 1974:

Prior to 1974, Puerto Rico had its own minimum wage and was not tethered to the general American wage. Then, in their infinite wisdom, the US Congress decided to normalize the minimum wage across all US territories and passed legislation making Puerto Rico’s minimum wage the same as the American wage had always been.

Well what happened next, you might ask? The economy imploded. Puerto Rico had an unemployment rate around 12% and an employment to population ratio of approximately 78% pretty much continuously between 1960 and 1974. The numbers had gone up a bit — they had come down a bit — but overall, year in and year out, you could look at Puerto Rico and be sure that the unemployment rate would be between 10 and 14 percent and the employment to population ration would be between 75 and 80 percent. You could set your watch by this kind of consistency.

Then Puerto Rico’s minimum wage was raised substantially beginning in 1974. The Puerto Rican unemployment rate then proceeded to increase for four consecutive years until it peaked at 20%. It roughly plateaued for half a decade or so, and then it went up again until Puerto Rico had an unemployment rate of 25% by 1984. Meanwhile, the employment to population ratio fell from 78% to 60% and has never recovered.

It is not just me pointing out the absolutely catastrophic consequences of the minimum wage increase in Puerto Rico — the National Bureau on Economic Research agrees. According to them:

    Imposing the U.S.-level minimum reduced total island employment by 8-10 percent compared to the level that would have prevailed had the minimum been the same proportion of average wages as in the United States. In addition, it reallocated labor across industries, greatly reducing jobs in low-wage sectors that had to raise minima substantially to reach federal levels. (3) Migrants from Puerto Rico to the United States are drawn largely from persons jobless on the island, with characteristics that make them liable to have been disemployed by the minimum wage. As the Puerto Rican minimum rose toward U.S. levels, the education of migrants fell below that of nonmigrants. (4) Migration was critical in allowing Puerto Rico to institute U.S.-level minimum wages and played a major role in the long term growth of real earnings in Puerto Rico by reducing the labor supply and raising the average qualifications of workers on the island.

In other words, the minimum wage increase caused massive unemployment, forced hundreds of thousands of unemployed Puerto Ricans to flee the island because there were no jobs, and the only reason the entire territory wasn’t rendered destitute is because the poorest Puerto Ricans all moved to Chicago or New York rather than choosing to remain unemployed on the island itself.

October 5, 2015

Trading Pollution: How Pollution Permits Paradoxically Reduce Emissions

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

Published on 18 Mar 2015

In an effort to reduce pollution, the government tried two policy prescriptions under the Clean Air Act Amendments of 1990. The first — command and control—mandated that each power plant lower its pollution by a determined amount. However, different firms face different cost curves and, because information is dispersed, policymakers don’t always know those costs. The second policy prescription — tradable pollution permits — empowered firms to use knowledge of their cost curves to buy or sell pollution permits as needed. Under this policy, the invisible hand of the market helped discover the lowest cost way of reducing pollution.

Much of the recycling you do is sheer wasted effort – or even worse

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

Everyone is in favour of recycling, right? It’s good for the earth, it’s good for the economy, it’s good for everyone! Except, as John Tierney points out, that’s pretty much all nonsense:

If you live in the United States, you probably do some form of recycling. It’s likely that you separate paper from plastic and glass and metal. You rinse the bottles and cans, and you might put food scraps in a container destined for a composting facility. As you sort everything into the right bins, you probably assume that recycling is helping your community and protecting the environment. But is it? Are you in fact wasting your time?

In 1996, I wrote a long article for The New York Times Magazine arguing that the recycling process as we carried it out was wasteful. I presented plenty of evidence that recycling was costly and ineffectual, but its defenders said that it was unfair to rush to judgment. Noting that the modern recycling movement had really just begun just a few years earlier, they predicted it would flourish as the industry matured and the public learned how to recycle properly.

So, what’s happened since then? While it’s true that the recycling message has reached more people than ever, when it comes to the bottom line, both economically and environmentally, not much has changed at all.

Despite decades of exhortations and mandates, it’s still typically more expensive for municipalities to recycle household waste than to send it to a landfill. Prices for recyclable materials have plummeted because of lower oil prices and reduced demand for them overseas. The slump has forced some recycling companies to shut plants and cancel plans for new technologies. The mood is so gloomy that one industry veteran tried to cheer up her colleagues this summer with an article in a trade journal titled, “Recycling Is Not Dead!”

[…]

The future for recycling looks even worse. As cities move beyond recycling paper and metals, and into glass, food scraps and assorted plastics, the costs rise sharply while the environmental benefits decline and sometimes vanish. “If you believe recycling is good for the planet and that we need to do more of it, then there’s a crisis to confront,” says David P. Steiner, the chief executive officer of Waste Management, the largest recycler of household trash in the United States. “Trying to turn garbage into gold costs a lot more than expected. We need to ask ourselves: What is the goal here?”

October 2, 2015

An Orgy of Innovation (Everyday Economics 5/7)

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

Published on 20 Apr 2015

The list of famous inventions from the last few centuries is long, and you may even be making use of one right now — laptops, smartphones, tablets, and televisions, for instance. There are countless unsung improvements, too, that make our daily lives much easier. We’ve all benefited from zip top sandwich bags, twist bottle caps, and long-lasting batteries, to name a few!

The economic historian Deirdre McCloskey coined the term “innovationism” to describe the phenomenal rise in innovation over the past couple hundred years. While there have always been inventors and innovators, that number exploded after the eighteenth century, contributing to what we’ve described in previous videos as the “Hockey Stick of Human Prosperity.”

Why has innovation grown so rapidly? Economist Douglass North argues it has to do with institutions such as property rights, non-corrupt courts, and rule of law, which lay the foundation for innovation to take place. Others attribute the rise to factors such as education or access to reliable energy. McCloskey argues that what really kicked innovation into high gear is a change in attitude — ordinary people who once celebrated conquerers and kings began to celebrate merchants and inventors.

In this video, we discuss these ideas further. After all, a better understanding of what drives innovation could help poor countries that still live on the handle of the “Hockey Stick” reach a much greater level of prosperity.

October 1, 2015

US tax cut proposals fail the laugh test

Filed under: Economics, Government, Politics, USA — Tags: , , , — Nicholas @ 05:00

At Ace of Spades H.Q., Ace responds to a recent Kevin Williamson post:

It is standard conservative theory that tax cuts and spending cuts go hand in hand. But after decades of ever-rising spending, coupled with occasional tax cuts, I’m not so certain of that any longer.

I believe it was after Reagan that Republican theorists began justifying his model of tax-cuts-now-spending-cuts-later as the “starve the beast” theory of limiting government — if we cut taxes, therefore cutting government’s resources, we should, logically, force the government to adapt itself to living with fewer taxpayer dollars. Ergo, spending should be forced down by the practicalities of the situation — either you start cutting spending, or else you start running up dangerous, Greece-level of debts.

The problem is that this country has always elected the “or else” part of this syllogism: We are racking up dangerous, Greece-levels of debts, and we’re barely even talking about that any longer.

The problem has grown so immense that we’ve decided to declare it officially a Non-Problem. (It will decide to re-assert itself as a Really Big Problem in a short period of time.)

So I no longer believe in the “starve the beast” theory, because the “starve the beast” theory relies upon Americans understanding the mid-to-longer term trajectory of their spending choices, which they plainly do not.

Since Americans are not capable of understanding the mid-to-longer term trajectory of their spending choices, it seems to me the only way to impose budget discipline and spending rollback is to offer Americans an immediate, as opposed to future, confrontation with reality: that is, if Americans wish to have so much government, they should be forced to pay for the level of government they are choosing, and not defer that payment (as they apparently will choose, every single time) into the future, to be imposed upon their children.

But, instead, they must be forced to reckon with the level of government they are choosing now by paying the full freight and cost of that government now.

That is to say: I believe that rolling back spending is only possible when Americans are made to feel the costs of the government they’re choosing, and that will only happen when they’re forced to actually pay for it.

The biggest hurdle, after the economic illiteracy of the voting public, is the starkly clear self-interest of the politicians: they can get re-elected only if they pander sufficiently to the voters. The voters, who do not understand how the government works (and refuse to believe it when you tell them) … want ever-more of it to benefit them as soon as possible. Telling the voters that you’ll not only not give them more but that you’ll be giving them significantly less is a great way to lose your next election (assuming you don’t get thrown out of office before that even comes up).

“Siege economics”

Filed under: Britain, Economics, History, WW2 — Tags: , , , — Nicholas @ 04:00

Paul T. Horgan explains why socialist politicians love “siege economics”:

Labour loves siege economies, really adores them. It allows full throated socialism to operate, enabling properly-selected and correctly-motivated state officials to mediate on every commercial transaction between individuals and entities, all in the name of necessity. This is Pitt’s ‘creed of slaves’, using controls to dictate how much can be sold to whom and if it can be sold at all.

Socialists love these economic dictatorships where the function of money as a storage of value and provider of price information is destroyed, where maximum wages and profits are imposed through penal taxation. State ownership of commerce is a given.

Socialists swoon at the thought of regulating demand by rationing supplies to all but a favoured few; it means there is no need for an economic strategy. No need for an interest rate policy if no amount of borrowed money can buy anything. Official inflation is perpetually low when prices are under statutory regulation, despite the inevitable shortages and consequent rise of the black market and the crime of hoarding newly-scarce everyday goods, which requires more Peoples’ Commissars to detect and punish.

Ordinary people who are forced to commit economic crimes just for everyday survival are easier to dominate as their guilt promotes a constant fear of the State and denunciation by their neighbours and friends. Control a person’s economics and you control the person, and socialism is all about the control. And Labour loves to run people’s lives by occupying the commanding heights of the economy to maximise dependency and promote clientelism in the electorate.

This explains why Labour were in their element when Churchill left Atlee, Morrison and Bevin to run the civilian economy while Britain’s greatest warlord used all his energies to create and focus a a domestic military machine and a global coalition to destroy fascism. It is ironic, given modern socialist rhetoric, that the greatest anti-fascist in human history was a Conservative. Perhaps leftists still feel guilt over their fellow travellers’ 1930s pacifism.

September 30, 2015

The Coase Theorem

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

Published on 18 Mar 2015

In this video, we show how bees and pollination demonstrate the Coase Theorem in action: when transaction costs are low and property rights are clearly defined, private arrangements ensure that the market works even when there are externalities. Under these conditions, the market properly manages externalities.

« Newer Posts — Older Posts »

Powered by WordPress