Quotulatiousness

October 9, 2014

“Japan’s high-speed rail system may end up being the victim of its own success”

Filed under: Economics, Japan, Railways, Technology — Tags: , — Nicholas @ 00:02

An interesting look at how the Japanese Shinkansen system has literally shaped Japan’s urban development pattern:

Photo by Wikipedia contributor Swollib (Source: Wikipedia)

Photo by Wikipedia contributor Swollib (Source: Wikipedia)

At 10am on 1 October 1964, with less than a week and a half to go before the start of the Tokyo Olympic Games, the two inaugural Hikari Super Express Shinkansen, or “bullet trains,” arrived at their destinations, Tokyo and Osaka. They were precisely on time. Hundreds of people had waited overnight in each terminal to witness this historic event, which, like the Olympics, heralded not just Japan’s recovery from the destruction of the second world war, but the beginning of what would be Japan’s stratospheric rise as an economic superpower. The journey between Japan’s two biggest cities by train had previously taken close to seven hours. The Shinkansen had made the trip in four.

The world’s first high-speed commercial train line, which celebrates its 50th anniversary on Wednesday, was built along the Tokaido, one of the five routes that connected the Japanese hinterland to Edo, the city that in the mid-1800s became Tokyo. Though train lines crisscrossed the country, they were inadequate to postwar Japan’s newborn ambitions. The term “shinkansen” literally means “new trunk line”: symbolically, it lay at the very centre of the huge reconstruction effort. All previous railways were designed to serve regions. The purpose of the Tokaido Shinkansen, true to its name, was to bring people to the capital.

[…]

In an interview in the Tokyo Shimbun newspaper last week, Takashi Hara, a political scholar and expert on Japanese railroads, said the policy of extending the Shinkansen was promulgated by Kakuei Tanaka, Japan’s prime minister from 1972 to 1974. “The purpose was to connect regional areas to Tokyo,” Hara said. “And that led to the current situation of a national Shinkansen network, which completely changed the face of Japan. Travel times were shortened and vibration was alleviated, making it possible for more convenient business and pleasure trips, but I have to say that the project just made all the [connecting] cities part of Tokyo.”

And where the Shinkansen’s long tentacles go, other services shrivel. Local governments in Japan rely heavily on the central government for funds and public works — it’s how the central government keeps them in line. Politicians actively court high-speed railways since they believe they attract money, jobs and tourists. In the early 1990s, a new Shinkansen was built to connect Tokyo to Nagano, host of the 1998 Winter Olympics. The train ran along a similar route as the Shinetsu Honsen, one of the most romanticised railroads in Japan, beloved of train buffs the world over for its amazing scenery – but also considered redundant by operators JR East because, as with almost all rural train lines in Japan, it lost money. There were only two profitable stations on the line — Nagano and the resort community of Karuizawa — and both would be served by the new Shinkansen. A large portion of the Shinetsu Honsen closed down; local residents who relied on it had to use cars or buses.

Shinkansen series 0 and series N700 (via Wikipedia)

Shinkansen series 0 and series N700 (via Wikipedia)

Meanwhile, the bullet train has sucked the country’s workforce into Tokyo, rendering an increasingly huge part of the country little more than a bedroom community for the capital. One reason for this is a quirk of Japan’s famously paternalistic corporations: namely, employers pay their workers’ commuting costs. Tax authorities don’t consider it income if it’s less than ¥100,000 a month — so Shinkansen commutes of up to two hours don’t sound so bad. New housing subdivisions filled with Tokyo salarymen subsequently sprang up along the Nagano Shinkansen route and established Shinkansen lines, bringing more people from further away into the capital.

The Shinkansen’s focus on Tokyo, and the subsequent emphasis on profitability over service, has also accelerated flight from the countryside. It’s often easier to get from a regional capital to Tokyo than to the nearest neighbouring city. Except for sections of the Tohoku Shinkansen, which serves northeastern Japan, local train lines don’t always accommodate Shinkansen rolling stock, so there are often no direct transfer points between local lines and Shinkansen lines. The Tokaido Shinkansen alone now operates 323 trains a day, taking 140 million fares a year, dwarfing local lines. This has had a crucial effect on the physical shape of the city. As a result of this funnelling, Tokyo is becoming even denser and more vertical — not just upward, but downward. With more Shinkansen passengers coming into the capital, JR East has to dig ever deeper under Tokyo Station to create more platforms.

October 8, 2014

Megan McArdle – It’s time for that talk

Filed under: Business, Economics — Tags: , — Nicholas @ 10:50

I don’t know how I missed this when it was published last week…

All right, boys and girls, it’s time to have some real talk about efficiency wages.

I know, you’re older now. You’re starting to notice things that you never noticed before. Like the differences between Costco and Wal-Mart, differences that suddenly seem so … intriguing. Exciting. You suddenly want to explore those feelings, maybe post a few GIFs to Facebook. You hear other kids talking, and suddenly you wonder about this whole new world of labor relations that you never even knew existed.

I want you to know that what you’re feeling is completely normal. Efficiency wages — that’s the scientific term, and we’re going to use scientific terms, not that dirty talk about scabs and exploiters that you hear in the locker room — are very exciting. It’s only natural that you want to explore. Now, stop tittering. I said “explore,” not “exploit.”

But you need to explore safely. You can’t just plunge straight into advocating a $15-an-hour minimum wage; you need to know all the facts so you can make sound, educated decisions about your labor-policy activism. So let’s talk about efficiency wages and how they work.

When an employer loves his workers … OK, never mind. Straight to the real talk.

As they used to say, “read the whole thing“.

October 6, 2014

Winners and losers when Wal-Mart (and Amazon) came along

Filed under: Business, Economics — Tags: , , — Nicholas @ 18:33

William Shughart refutes the “dark side of Amazon” meme by pointing out what it was like before Amazon and Wal-Mart:

Before the advent of Wal-Mart, rural America was a retail desert. Small shops, limited product availability and, yes, “hometown service”. But the prices of most items were high because the only alternative to shopping locally was to drive to the nearest city or order through the Sears or JC Penney catalog and depend on timely delivery by the US mail in, it was to be hoped, an undamaged package. The downside of local retail shops (limited options and high prices) fell most heavily on low-income households, which may not have had an automobile or could not afford to take time off work to shop at larger urban retailers or even at local merchants, which typically closed at 5 p.m. Wal-Mart solved both problems in one fell swoop.

Sure, local retailers suffered losses of business and some were forced into bankruptcy, but consumers (the only group whose welfare matters in a free market economy) won big-time. Amazon has generated benefits for consumers many times larger than Sam Walton ever dreamt of.

But what about the jobs that disappeared in local retail outlets as Amazon and Wal-Mart drove costs (and prices) down by inventing markedly more efficient distribution networks and negotiating lower prices with manufacturers and other suppliers on behalf of millions of consumers with little bargaining power of their own? An economic system’s chief purpose is to create prosperity (wealth), not jobs. Creating jobs — at the point of a gun, as Josef Stalin proved, or as FDR did by drafting millions of men to shoulder arms against the Axis powers — is easy; creating wealth is not. Prosperity materializes only if existing resources (land, labor and capital) can be utilized more efficiently, squeezing out “waste” and redundancy so that resources can be released from current employments and redirected by alert entrepreneurs to the production of new products that consumers may not even know they want (an iPhone ten years ago, for example) until they become available.

Hightower bemoans the working conditions in Amazon’s warehouses, a few of which literally become sweatshops during hot summer months. I am willing to bet, however, that if the people employed in one of Amazon’s “dehumanizing hives” (his phrase) were asked whether they wanted to quit their jobs, not one hand would be raised, especially so in an economy with an unemployment rate still hovering around six percent and a rate of underemployment twice that figure.

September 28, 2014

This is why you rarely see “Made in India” on manufactured goods

Filed under: Bureaucracy, Economics, India — Tags: , , , , — Nicholas @ 11:13

At The Diplomat, Mohamed Zeeshan talks about India’s self-imposed disadvantages in manufacturing both for domestic and export consumption:

Indian Prime Minister Narendra Modi’s maiden Independence Day speech was laced with inspiring rhetoric. But of the many things he said, the one slogan that inevitably caught public attention was this: “Come, make in India!” With those words, Modi was trying to make the case for turning India into the world’s next great manufacturing hub. Understandably, the Indian populace was thrilled.

India is one of the world’s ten largest economies (and is third largest on a purchasing power parity basis), with a total annual output of nearly $2 trillion. As much as 57 percent of this output is produced by a service sector that employs just 28 percent of the population, largely concentrated in urban parts of the country. That is no surprise, because most Indians lack the skills and education to join the more knowledge-intensive service sector. What they need is what successful developing nations all over the world have had ever since the Industrial Revolution: a robust and productive manufacturing sector.

Yet India’s manufacturing sector contributes just 16 percent to the total GDP pie (China’s, by contrast, accounts for almost half of its total economic output). Victor Mallet, writing in the McKinsey book Reimagining India, recently offered an anecdote that was illuminating. “One of India’s largest carmakers recently boasted that it was selling more vehicles than ever and that it was hiring an extra eight hundred workers for its factory,” he wrote, “But the plant employing those workers belongs to the Jaguar Land Rover subsidiary of Tata Motors and is in the English Midlands, not in job-hungry India.”

Mallet goes on to make a point that has been made frequently by Indian economists: The world doesn’t want to “make in India,” because it is simply too painful. There’s bureaucratic red tape, a difficult land acquisition act, troublesome environmental legislation, a shortage of electricity, and a lack of water resources. The only thing India doesn’t seem to lack is labor, but that merely adds to the problem. As Mallet points out in the same essay, aptly titled “Demographic dividend – or disaster?”, “India’s population grew by 181 million in the decade to 2011 – and (despite falling fertility rates) a rise of nearly 50% in the total number of inhabitants is unavoidable.” But the number of jobs being added to feed that population is inadequate.

However, the labor dividend is still important. India doesn’t need to reduce the number of hands on deck. It needs to weed out the challenges that stop them from being productive.

September 23, 2014

“Rock star economy” leads to first majority government in New Zealand since 1996

Filed under: Economics, Pacific, Politics — Tags: , , , , — Nicholas @ 08:06

Anthony Fensom reports on Saturday’s election results in New Zealand:

New Zealand’s “rock star economy” helped center-right Prime Minister John Key achieve a thumping election victory. But with major trading partner China slowing, are financial market celebrations premature?

The New Zealand dollar, government bonds, and stocks gained after Key’s National Party romped to power in Saturday’s poll, securing its third straight term and the nation’s first majority government since proportional representation was introduced in 1996.

Despite “dirty politics” claims and a late attempted campaign ambush by internet entrepreneur Kim Dotcom, the incumbent National Party won 61 of 121 parliamentary seats and 48.1 percent of the vote, the party’s best result since 1951.

In contrast, the main opposition left-leaning Labour Party, which pledged an expansion of government, secured only 24.7 percent of the vote for its worst performance since 1922. The Greens won 10 percent and New Zealand First 8.9 percent as pre-election predictions of a closer race proved false.

Key pledged to maintain strategic alliances with the Maori, ACT and United Future parties, which won four seats between them, further strengthening his parliamentary majority.

[…]

“Like [Australian Prime Minister] Abbott, Key as a new prime minister inherited a budget and an economy in deep trouble…Six years later, the budget is in surplus, unemployment at 5.6 percent is falling and the economy is growing so strongly the New Zealand Reserve Bank became the first among developed countries to raise interest rates to deter inflation,” noted the Australian Financial Review’s Jennifer Hewett.

“Not only did the Key government cut personal and corporate tax rates, it raised the goods and services tax to 15 percent while steadily reducing government spending over years of ‘zero budgets,’” wrote Hewett, who urged Abbott to “learn some sharp lessons” from Key’s electoral successes.

Key’s party has pledged to cut government debt to 20 percent of gross domestic product (GDP), reduce taxes “when there is room to do so” and create more jobs, aiming to undertake further labor and regulatory reforms as well as boosting the supply of housing.

September 22, 2014

Reason.tv – Matt Ridley on How Fossil Fuels are Greening the Planet

Filed under: Economics, Environment, Food, Science — Tags: , — Nicholas @ 08:29

Published on 13 Mar 2013

Matt Ridley, author of The Red Queen, Genome, The Rational Optimist and other books, dropped by Reason‘s studio in Los Angeles last month to talk about a curious global trend that is just starting to receive attention. Over the past three decades, our planet has gotten greener!

Even stranger, the greening of the planet in recent decades appears to be happening because of, not despite, our reliance on fossil fuels. While environmentalists often talk about how bad stuff like CO2 causes bad things to happen like global warming, it turns out that the plants aren’t complaining.

September 20, 2014

Corporate inversions

Filed under: Business, Economics — Tags: , — Nicholas @ 11:56

The most recent corporate inversion that hit the news — Burger King and Tim Hortons — may or may not work out, but it’s generally a sensible economic strategy that can yield strong results for the shareholders. In the most recent issue of The Freeman, Stewart Dompe and Adam C. Smith talk about why inversions are an example of competitive governance in action:

Populist themes like “economic patriotism” may appeal to voters, but such arguments are nonsensical: Firms are ultimately responsible to their shareholders. As Judge Learned Hand wrote, “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”

If anything, firms have a moral responsibility to minimize their taxable liabilities. The legal structure of a firm establishes the relationship between shareholders, who own the capital, and managers that make operating decisions. Executives have a fiduciary responsibility to pay the lowest tax possible because they are the stewards of their shareholders’ wealth. There is no functional difference between an executive who spends millions of dollars on a lavish party and an executive who gives that money to Washington instead—except that the former is probably a lot more fun to be around.

Think about tax compliance like a rent check owed to one’s landlord, with the added complication that it’s very difficult to move. Suppose a tenant is currently renting multiple apartments at one location, but decides the rent is just too damn high. Since the tenant can’t relocate entirely, suppose she moves some of her stuff out of one of the apartments into a storage unit across town, thus saving significantly on her rent. Would this be seen as unethical in that the tenant is attempting to avoid her fiduciary obligation to the landlord? Of course not. She is simply trying to reduce the costs of residing in a particular location.

In the same vein, minimizing the firm’s tax burden means minimizing part of the firm’s operating costs. Just as a resource manager can identify a more cost-efficient way to produce goods and services, so can a tax lawyer identify a more cost-efficient way of maintaining tax compliance. A business has no moral obligation to always use the same suppliers, be they suppliers of production inputs or corporate charters. The law is the law and firms have the option of changing how they are structured and located in order to minimize their taxable liabilities. If they use loopholes, so be it: Loopholes are by definition legal. Firms only have the obligation to pay the tax mandated by the law.

September 17, 2014

Creating jobs, good. Creating subsidized jobs, not so good.

Filed under: Economics, Government — Tags: , , , , , — Nicholas @ 09:33

Gregg Easterbrook on the difference between ordinary jobs and government subsidized job creation:

Elon Musk Recharges His Bank Account: Tesla’s agreement with Nevada to build a battery factory is expected to create about 6,000 jobs in exchange for $1.25 billion in tax favors. That’s about $208,000 per job. More jobs are always good. But typical Nevada residents with a median household income of $54,000 per year will be taxed to create very expensive jobs for others. Volkswagen is expanding its manufacturing in Tennessee, which is good. But the state has agreed to about $300 million in subsidies for the expansion, which will create about 2,000 jobs — that’s $150,000 per new job, much of the money coming from Tennessee residents who can only dream of autoworkers’ wages. The median household income in Tennessee is $44,140, about a third of the tax subsidies per new Volkswagen job. The Tesla handout was approved by the Democratic state legislature of Nevada; Tennessee’s Republican-controlled state government approved the Volkswagen corporate welfare deal.

At least it’s a bargain compared to federally subsidized solar jobs. A Nevada solar project — state that is home to Senate Majority Leader Harry Reid, President Barack Obama’s closest ally on Capitol Hill — cost $10.8 million in subsidies per job created. Local public interest groups noticed the extreme subsidy while the national media did not.

This cheeky website monitors giveaways state by state.

September 11, 2014

Would Scottish separation resemble the “Velvet Divorce” of Czechoslovakia?

Filed under: Britain, Economics, Europe — Tags: , , , , — Nicholas @ 11:40

At the Volokh Conspiracy, Ilya Somin looks at the breakup of Czechoslovakia and compares the possible UK-Scotland divorce in that context:

One relevant precedent is the experience of the “Velvet Divorce” between Slovakia and the Czech Republic, whose success is sometimes cited by Scottish independence advocates as a possible model for their own breakup with Britain. Like many Scottish nationalists, advocates of Slovak independence wanted to break away from their larger, richer, partner, in part so they could pursue more interventionist economic policies. But, with the loss of Czech subsidies, independent Slovakia ended up having to pursue much more free market-oriented policies than before, which led to impressive growth. The Czech Republic, freed from having to pay the subsidies, also pursued relatively free market policies, and both nations are among the great success stories of Eastern Europe.

Like Slovakia, an independent Scotland might adopt more free market policies out of necessity. And the rump UK (like the Czechs before it), might move in the same direction. The secession of Scotland would deprive the more interventionist Labor Party of 41 seats in the House of Commons, while costing the Conservatives only one. The center of gravity of British politics would, at least to some extent, move in a more pro-market direction, just as the Czech Republic’s did relative to those of united Czechoslovakia.

If the breakup of the UK is likely to resemble that of Czechoslovakia, this suggests that free market advocates should welcome it, while social democrats should be opposed. Obviously, other scenarios are possible. For example, famed economist Paul Krugman claims that Scottish independence is likely to result in an economic disaster, because a small country without a currency of its own cannot deal with dangerous macroeconomic crises. I lack the expertise to judge whether Krugman’s prediction is sound. But it does seem like there are obvious counterexamples of small countries that have done well without having their own currencies; Slovakia is a good example. Moreover, although Scottish independence advocates today claim that they will stick to the pound, they could reverse that decision in the future.

All of the above assumes that an independent Scotland will be able to stay in the European Union, and that there would be free trade and freedom of movement between it and the remaining United Kingdom. If the Scots get locked out of the EU or prevented from interacting freely with the UK (perhaps as a result of backlash by angry English public opinion), Scottish independence becomes a lot less viable and a lot more likely to cause serious harm on both sides of the new border.

QotD: The real lesson taught by mandatory “volunteer” work

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

What about the rationalization that charitable extracurricular activities teach kids important lessons of moral engagement? There are reasons to be skeptical. A skilled professional I know had to turn down an important freelance assignment because of a recurring commitment to chauffeur her son to a resumé-building “social action” assignment required by his high school. This involved driving the boy for 45 minutes to a community center, cooling her heels while he sorted used clothing for charity, and driving him back — forgoing income which, judiciously donated, could have fed, clothed, and inoculated an African village. The dubious “lessons” of this forced labor as an overqualified ragpicker are that children are entitled to treat their mothers’ time as worth nothing, that you can make the world a better place by destroying economic value, and that the moral worth of an action should be measured by the conspicuousness of the sacrifice rather than the gain to the beneficiary.

Steven Pinker, ” The Trouble With Harvard: The Ivy League is broken and only standardized tests can fix it”, The New Republic, 2014-09-04.

September 9, 2014

QotD: The Iron Law of Redistributionism

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

[P]olicies intended to “help” the poor are invariably hijacked by a rentier class that fattens on the rising diversion of income. Result: help never arrives, much wealth is destroyed, growth is strangled, and the poor get poorer.

Eric S. Raymond, Google+, 2014-09-06.

September 3, 2014

Economic growth as a language extinction factor

Filed under: Economics, History — Tags: — Nicholas @ 10:01

In Forbes, Tim Worstall talks about a recent paper in the Proceedings of the Royal Society which notes that minority languages are at greater threat of extinction as the speakers of that language experience economic prosperity:

Here’s an interesting little economic finding: the extinction of minority languages seems to be largely driven by economic growth and success. It’s perhaps not one of those explanations that we would immediately think of but once it has been brought to our attention it seems obvious enough given what is actually economic growth. In terms of public policy this perhaps means that we shouldn’t worry too much about languages disappearing: because that is a signal that economic development is happening, people are becoming less poor. But people ceasing to use a language because it no longer fits their needs is one thing: we should still study, analyse and record those languages as they’re all part of our shared human experience.

The paper is in the Proceedings of the Royal Society B and can be found here:

    By contrast, recent speaker declines have mainly occurred at high latitudes and are strongly linked to high economic growth. Threatened languages are numerous in the tropics, the Himalayas and northwestern North America. These results indicate that small-population languages remaining in economically developed regions are seriously threatened by continued speaker declines. However, risks of future language losses are especially high in the tropics and in the Himalayas, as these regions harbour many small-population languages and are undergoing rapid economic growth.

Worth thinking through the different types of economic growth that we traditionally identify. The first is Malthusian growth. Here an advance in technology (say, a new, higher productivity, farming method) leads to there being more resources to support the new generation. More of them survive to then have their own children and the population increases. At some point in the future living standards return to where they were given that larger population. This is a reasonable description of near all economic growth before 1750 or so (and made the Rev. Malthus correct in his gloomy predictions about economic growth for pretty much all of history before he sat down to write had indeed been like this). Malthusian growth is likely to increase the population speaking whatever language it is that that society speaks. For the obvious reason that the growth is morphing into more people to speak that language.

The second form of growth is Smithian growth. Here, growth is coming from the division and specialisation of labour and the resultant trade in the increased production this enables. Almost by definition this requires that the network of people that one is trading with, dividing labour with, expands. To the point that one is, at some point, going to start doing so with people outside one’s clan, tribe or language. The cooperation of trade requires that there be some ability to converse and therefore there’s pressure to adopt some language which is mutually compatible. As large groups meet large groups then we might find some synthesis of language going on: as say English is an obvious synthesis of Romance and Germanic languages. Where small groups are meeting larger and trading with them then we’re more likely to see the adoption of the larger group language and the extinction of the smaller.

QotD: The relative size of the Chinese economy, historically speaking

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

People seem to want to get freaked out about China passing the US in terms of the size of its economy. But in the history of Civilization there have probably been barely 200 years in the last 4000 that China hasn’t been the largest economy in the world. It probably only lost that title in the early 19th century and is just now getting it back. We are in some senses ending an unusual period, not starting one.

Warren Meyer, “It is Historically Unusual for China NOT to be the Largest Economy on Earth”, Coyote Blog, 2014-08-30.

September 2, 2014

British government “austerity”

Filed under: Britain, Economics, Media — Tags: , , , , — Nicholas @ 14:29

Theodore Dalrymple explains why changing the name of something does not actually change the thing being described, no matter how much politicians or journalists wish it did:

… some errors are important, and one sees them more insistently the older one grows. For example, the other day I read an article in Le Monde about the forthcoming referendum in Scotland on independence from the United Kingdom. The author of the article was clearly sympathetic to the cause of independence, but that was not the cause of my irritation with the article, nor the fact that he quoted an old man, a former trade union militant, who said that he was in favor of independence, among other reasons, because the United Kingdom was the fourth most unequal country in the world. If old men in Scotland can be as ignorant of the world as that, it is an interesting sociological observation; and the author of the article is almost certainly right that those in favor of Scottish independence favor a state even more extensive in the name of equality than the one that they already have.

No, I was irritated rather by the fact that the author of the article accepted that the policy of the present British government can properly be described as one of austerity. What the alleged austerity amounts to is this: that in the current year the government will borrow only one in six of the pounds it spends instead of one in five, as it did last year. As to the reasons for this less than startling decline in its borrowing requirements, it was not because the government was spending less but because it was receiving more taxes, from the speculative housing bubble which it has done much to fuel. If that bubble should burst, the borrowing necessary to maintain current levels of expenditure (already very high) would rise again, possibly higher than ever.

This is not a question of whether the economic policy followed by the government is the right one or not: perhaps it is and perhaps it isn’t. It is a question of the honest use of words. One would not say of a man who passed from smoking sixty cigarettes a day to fifty that he had given up smoking, or that he had exercised great self-denial. And one would not, or rather should not, say of an organization that had balanced its budget once in fifty years (the British government) that it was practicing austerity merely because it had to borrow a slightly lower percentage of what it spent than it did the year before. This is to deprive words of their meaning.

But does this matter? As the philosopher Bishop Butler once said, everything is what it is and not another thing. A budget deficit is a budget deficit, whether you call it profligacy or austerity. A thing is not changed by being called something different.

Unfortunately, matters are not quite as clear-cut as that. In human affairs, words matter, as much because of their connotations as of their denotations. Austerity means stern treatment and self-discipline. It means harshness and astringency. Needless to say, harshness in their government is not what most people look or will vote for. If reducing the rate at which you overspend and accumulate debt is called austerity, no one will dare go any further in that direction, though it were the right direction in which to go. Words, said Hobbes, are wise men’s counters but the money of fools: so that many men will take the name for the thing itself. Whether more active attempts to balance the budget would be advisable I leave to economists to decide (they can’t, of course).

August 20, 2014

New report calls for Ontario to break up the LCBO

Filed under: Business, Cancon, Economics, Wine — Tags: , , , , , — Nicholas @ 13:33

In the Toronto Star, Richard Brennan reports on a new study by the C.D. Howe Institute calling for the province to join the modern era:

The “quasi-monopoly” LCBO and The Beer Store have hosed Ontario consumers long enough, a C.D. Howe Institute report says.

The right-wing think tank said the Ontario government should strip them both of their almost exclusive right to sell beer, wine and spirits, suggesting the report proves that opening up to alcohol sales to competition will mean lower prices.

“The lack of competition in Ontario’s system for alcoholic beverage retailing causes higher prices for consumers and foregone government revenue,” states the 30-page report, Uncorking a Strange Brew: The Need for More Competition in Ontario’s Alcoholic Beverage Retailing System, to be released publicly Wednesday.

The report includes tables comparing Ontario beer prices to other provinces with greater private sector involvement, particularly with Quebec, where a case of 24 domestic beers can be as much as $10 cheaper and even more for imported brands.

Since 1927, when the Liquor Control Act was passed, the Liquor Control Board of Ontario and the privately owned Brewers Warehousing Company Limited have had a stranglehold on alcohol sale in the province.

“The Beer Store’s quasi-monopoly of beer retailing is … an anachronism,” the report says, referring to the foreign-owned private retailer that is protected by provincial legislation.

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