It’s one of the marvels of the Canadian electorate. Show Canadians a special interest group that uses its government-granted privileges to fleece consumers, and they’ll embrace it as a “national champion,” a “uniquely Canadian way of life” or some equally vapid catch-phrase.
This is from the Wikipedia entry for Stockholm Syndrome:
Stockholm syndrome, or capture–bonding, is a psychological phenomenon in which hostages express empathy and sympathy and have positive feelings toward their captors, sometimes to the point of defending them.
What we suffer from is the economic policy equivalent. Call it “Canada Syndrome”: a tendency for consumers to identify with the producer interests that are holding them hostage.
Stephen F. Gordon, “Our Stockholm Syndrome about supply management”, Maclean’s, 2013-03-05
March 6, 2013
QotD: Canada Syndrome
March 4, 2013
Solar power in a dark German winter
The German government is having to pay a lot of money in subsidies to solar power generators, but is also having to scramble to buy power from other European sources as the solar output is falling far below current demands:
The Baedeker travel guide is now available in an environmentally-friendly version. The 200-page book, entitled “Germany – Discover Renewable Energy,” lists the sights of the solar age: the solar café in Kirchzarten, the solar golf course in Bad Saulgau, the light tower in Solingen and the “Alster Sun” in Hamburg, possibly the largest solar boat in the world.
The only thing that’s missing at the moment is sunshine. For weeks now, the 1.1 million solar power systems in Germany have generated almost no electricity. The days are short, the weather is bad and the sky is overcast.
As is so often the case in winter, all solar panels more or less stopped generating electricity at the same time. To avert power shortages, Germany currently has to import large amounts of electricity generated at nuclear power plants in France and the Czech Republic. To offset the temporary loss of solar power, grid operator Tennet resorted to an emergency backup plan, powering up an old oil-fired plant in the Austrian city of Graz.
Solar energy has gone from being the great white hope, to an impediment, to a reliable energy supply. Solar farm operators and homeowners with solar panels on their roofs collected more than €8 billion ($10.2 billion) in subsidies in 2011, but the electricity they generated made up only about 3 percent of the total power supply, and that at unpredictable times.
March 1, 2013
North Korea’s real inflation rate may have reached 116%
In the Cato@Liberty blog, Steve Hanke looks at North Korea’s offical statistics and makes an educated guess at what they conceal, rather than reveal about the country’s state:
During the past few weeks, North Korea has been the subject of outsized news coverage. The recent peacocking by Supreme Leader Kim Jong Un — from domestic martial law policies to tests of the country’s nuclear weapons capabilities — has successfully distracted the media from North Korea’s continued economic woes. For starters, the country’s plans for agricultural reforms have been deep-sixed, and, to top it off, I estimate that North Korea’s annual inflation rate hit triple digits for 2012: 116%, to be exact.
Unfortunately, the official shroud of secrecy covering North Korea’s official information and statistics remains more or less intact. But, some within North Korea have begun to shed light on this “land of illusions”. For example, a team of “citizen cartographers” helped Google construct its recent Google Maps’ exposition of North Korea’s streets, landmarks, and government facilities. In addition, our friends at DailyNK have successfully been reporting data on black-market exchange rates and the price of rice in North Korea — data which allowed me to conclude that the country experienced an episode of hyperinflation from December 2009 to mid-January 2011.
February 23, 2013
Provincial budgets range from less-than-accurate to verging on financial fraud
Andrew Coyne, after a short diatribe about our first-past-the-post electoral system (he’s agin’ it), gets down to brass tacks about provincial finances:
As bad as the federal government is, the provinces are worse. And as horrendous as the provinces are generally, the record in some provinces borders on the fraudulent. Saskatchewan and Alberta, for instance, have overspent their budgets in the past decade by an average — an average — of nearly 5%. And since each year’s overshoot becomes the baseline for next year’s budget, the cumulative impact is to produce spending, in the fiscal year just ended, vastly larger than was ever specifically authorized in advance: in Saskatchewan’s case, nearly 40% larger.
That’s as best the [C. D. Howe Institute] can make out. Provincial accounting is notoriously haphazard and inconsistent. Not only does each province use its own rules and procedures, making it impossible to compare the public accounts from one province to another with any confidence, but in several provinces — Newfoundland and Quebec are the worst offenders — the public accounts are not even stated on the same basis as the budget.
And while the public accounts must ultimately prevail, efforts to reconcile the two sets of figures, and to explain the discrepancies, remain spotty. In some provinces — Quebec, Saskatchewan, British Columbia — auditors have refused, repeatedly, to sign off on the books without attaching reservations.
So not only can voters have little confidence that governments will spend what they said they would, they can have little ability even to reckon how much they overspent, or to compare their own province’s performance with the others’. All in all, a thoroughly disgraceful performance. (Honourable exceptions: Ontario and Nova Scotia, though voters in both provinces have other reasons to doubt their governments’ fiscal candour.)
February 21, 2013
February 20, 2013
February 18, 2013
February 14, 2013
The LCBO crowds out another private business
In the latest Ontario Wine Review, Michael Pinkus writes an obituary for Wine Access magazine and hurls “J’accuse!” at the Ontario government’s liquor monopoly for the murder:
Now there are some of you out there who will be asking how can the Ontario Liquor Monopoly put an Alberta-based magazine out of business — well it’s actually quite simple, if you’re willing to connect the dots: if you only have a certain amount of advertising dollars to spend in Canada how much are you going to allocate to the largest population in the country (Ontario); even more to the point, how much do you put into the Liquor Board willing to buy more product if you’ll spend more of your ad budget with them versus a magazine that might (or might not) increase your sales.
I have long advocated for the LCBO to cease publication of this magazine. Don’t get me wrong, it’s a beauty of a publication — my wife fawns over the pictures every issue — but it’s a publication that competes against private enterprise, and the LCBO is after all an extension of the government — so what I, and many others have said is unfortunately true: the government in essence, taking thousands of dollars out of the hands of the companies that pay taxes, their own populace, and competing against them. Sure I hear many of you saying “finally my tax dollars hard at work”: but ask yourself this question: how would you like the government competing against your business?
People don’t see the problem with Food & Drink magazine because they aren’t in the publishing business and are not affected by its publication, but consider these numbers: in the Holiday 2011 issue of said magazine, an almost Sears catalogue sized edition, there were 308 pages total, 140 of those were advertising (not including product placement and promotions within editorial / advertorial which is no doubt paid for as well — and don’t forget the 6 hefty inserts included inside the plastic wrapper) … that’s money that was not spent with privately run magazines that could have, and most likely, would have. Here are some more numbers to boggle the mind. According to the Luxury Media Sales website a full page in F&D magazine is $20,588 (2012 rate) — that’s a lot of money the government of Ontario is taking from their tax paying private enterprise magazines (in a democratic, free market system — who would believe the government is competing against their own populace). Think about that kind of money funneling out of your business sector, your chosen profession or what you do for a living (it’s close to 3 million dollars – 140 x $20,588) … do you think you’d be making the kind of money you are now? Would you welcome that kind of competition? And before you crassly answer “sure, the government can’t do anything right” also put in the fact that they’re the biggest game in town and control what you sell. The nightmare scenario is the closing of your business due to unfair competition and lack of revenue (but it’s the government, so what can you do) — in the publishing game you just shuttered a magazine because of lack of revenue and unfair competition. If you’re RedPoint Media you close down Wine Access magazine.
So, in Clue fashion, who killed Wine Access? It was Colonel LCBO, in the wine cellar, with the government monopoly privilege.
Microsoft Excel: the most dangerous software on Earth?
I’ve made this case in conversation several times — usually after having to forensically determine just why someone’s spreadsheet produced an unlikely answer — the greatest strength of spreadsheets is also their greatest weakness. Anyone who’s built a spreadsheet knows how easy it is to make a mistake, and how hard that mistake can be to detect after the fact. Spreadsheets are free-form: you can set up relationships on the fly, pull data from one place to plug into a different formula somewhere else. It’s literally empowering to gain that much control over your data without having to learn a full programming language.
But that flexibility and power comes at a cost: there’s no built-in error checking of your assumptions. Oh, it’ll alert you to practical problems like mis-matched data types or mechanical errors in your formula, but can’t tell you whether the operation you’re attempting makes sense. The program can’t read your mind and can’t sanity check your work.
Do a spreadsheet for your family budget and you’ll almost certainly make a minor error or two.
Make a set of inter-linked spreadsheets and you probably double the chances of error for each new spreadsheet in the set.
Make a set of inter-linked spreadsheets that require manual copy-and-paste updates and you exponentially increase the chances of error.
Then, make that manually updated set of spreadsheets have a real-world impact on vast amounts of money:
To give you and idea of how important this is here’s a great tale from James Kwak:
The issue is described in the appendix to JPMorgan’s internal investigative task force’s report. To summarize: JPMorgan’s Chief Investment Office needed a new value-at-risk (VaR) model for the synthetic credit portfolio (the one that blew up) and assigned a quantitative whiz (“a London-based quantitative expert, mathematician and model developer” who previously worked at a company that built analytical models) to create it. The new model “operated through a series of Excel spreadsheets, which had to be completed manually, by a process of copying and pasting data from one spreadsheet to another.” The internal Model Review Group identified this problem as well as a few others, but approved the model, while saying that it should be automated and another significant flaw should be fixed.** After the London Whale trade blew up, the Model Review Group discovered that the model had not been automated and found several other errors. Most spectacularly,
“After subtracting the old rate from the new rate, the spreadsheet divided by their sum instead of their average, as the modeler had intended. This error likely had the effect of muting volatility by a factor of two and of lowering the VaR . . .”
To translate that into the vernacular, the bank, JP Morgan, was running huge bets (tens of billions of dollars, what we might think of a golly gee gosh that’s a lot of money) in London. The way they were checking what they were doing was playing around in Excel. And not even in the Masters of the Universe style that we might hope, all integrated, automated and self-checking, but by cutting and pasting from one spreadsheet to another. And yes, they got one of the equations wrong as a result of which the bank lost several billion dollars (perhaps we might drop the gee here but it’s still golly gosh that’s a lot of money).
And it’s not just JP Morgan: every financial firm, every bank, every brokerage uses Excel (or another spreadsheet program). Multiply JP Morgan’s experiences by the number of companies to get a rough idea of how much is at risk from un-audited (possibly even un-audit-able) financial models running on spreadsheets.
February 13, 2013
The imaginary trade-off between ecology and economics
Matt Ridley on the improvements in the environment in the western world:
Extrapolate global average GDP per capita into the future and it shows a rapid rise to the end of this century, when the average person on the planet would have an income at least twice as high as the typical American has today. If this were to happen, an economist would likely say that it’s a good thing, while an ecologist would likely say that it’s a bad thing because growth means using more resources. Therein lies a gap to be bridged between the two disciplines.
The environmental movement has always based its message on pessimism. Population growth was unstoppable; oil was running out; pesticides were causing a cancer epidemic; deserts were expanding; rainforests were shrinking; acid rain was killing trees; sperm counts were falling; and species extinction was rampant. For the green movement, generally, good news is no news. Many environmentalists are embarrassed even to admit that some trends are going in the right direction.
[. . .]
Why are environmental trends mainly positive? In short, the gains are due to “land sparing,” in which technological innovation allows humans to produce more from less land, leaving more land for forests and wildlife. The list of land sparing technologies is long: Tractors, unlike mules and horses, do not need to feed on hay. Advances in fertilizers and irrigation, as well as better storage, transport, and pest control, help boost yields. New genetic varieties of crops and livestock allow people to get more from less. Chickens now grow three times as fast in they did in the 1950s. The yield boosts from genetically modified crops is now saving from the plow an area equivalent to 24 percent of Brazil’s arable land.
What is really making a positive dent in the environmental arena is the unintended effects of technology rather than nature reserves or exhortations to love nature. Policy analyst Indur Goklany calculated that if we tried to support today’s population using the methods of the 1950s, we would need to farm 82 percent of all land, instead of the 38 percent we do now. The economist Julian Simon once pointed out that with cheap light, an urban, multi-story hydroponic warehouse the size of Delaware could feed the world, leaving the rest for wilderness.
It is not just food. In fiber and fuel too, we replace natural sources with synthetic, reducing the ecological footprint. Construction uses less and lighter materials. Even CO2 emissions enrich crop yields.
Debunking the “1970s had a higher standard of living than today” meme
Don Boudreaux produces an anecdotal list of things that refute the inane notion that America’s standard of living peaked in the 1970s:
What follows here is drawn from memory. Perhaps my memory is grossly distorted, but my report of it here is an undistorted reflection of that memory. Here’s some of what I recall, of relevance to this discussion, from middle-class America of the 1970s; I offer the 25 items on this list in no particular order, except as they come to me.
(1) Automobiles broke down much more frequently than they break down today, hence, leaving motorists stranded, sometimes for hours, more often than is the case today.
(2) Automobiles rusted faster and more thoroughly than they do today.
(3) Someone in his or her early 70s was widely regarded as being quite old.
(4) “Old” people back then were much more likely to wear dentures than are “old” people today.
(5) Frozen foods in supermarkets were gawdawful by the standards of today – in terms both of quality and of selection.
[. . .]
(21) Coffee sucked. (It was almost all made from robusta beans.) And the selection of teas was pretty much limited to whatever Lipton sold.
(22) A diagnosis of cancer was far more frightening than it is today. Any person so diagnosed was regarded as being as good as dead.
(23) Going to college was much more unusual than it is today.
(24) Contact lenses were much more expensive than they are today. I purchased insurance (!) on my first pair of soft contact lenses (which I bought in 1980) in order to protect myself against the financial consequences of losing or damaging the one pair that I bought. (Such lenses were bought one pair at a time.)
(25) The idea of widespread use of personal computers seemed like science fiction. I very clearly recall overhearing, in the Spring of 1980, one of my economics professors, Wayne Shell (who also taught computer science), telling someone that he believed that, within a few years, many American households will have a computer. I thought at the time that Dr. Shell’s prediction was fancifully far-fetched.
I could go on, listing at least another 50 such recollections. But instead I’ll end this post here.
February 11, 2013
Senate report calls for tariff cuts
In the Financial Post, Terence Corcoran looks at the good and not-so-good aspects of a recent Senate report on the reasons Canadians pay so much more for goods than Americans (even when the goods are identical and the currencies are trading at par):
Retail prices in Canada, seemingly across the board, are higher. Even with the Canadian dollar at par, the price of everything from running shoes to televisions and Chevy Camaros to books is said to be above U.S prices. One bank report once put the Canada-U.S. price gap at 20%.
Somebody’s gotta do something, everybody agrees. Enter the Senate committee with one of the most hard-nosed, market-driven overviews of how and why Canadians pay more for goods at retail. The report dodges and fudges some key issues, especially farm product supply management, which was seen by the committee and the retail industry as too politically hot to handle.
[. . .]
Even in this, however, the committee pulls its first punch. The recommendation to “review” such tariffs — watery phrasing in itself — also suggests “keeping in mind the impact on domestic manufacturing.” Sorry, folks, but you can’t have it both ways. Tariffs are protectionist devices for manufacturers that consumers pay for. If you want to reduce the price to consumers, the $3.9-billion in protection for manufacturers has to go. End of discussion.
What makes The Canada-USA Price Gap even more valuable is its compact insights into the many causes of higher retail prices in Canada. The economy is a complicated and often unfathomable series of market and price relationships beyond the power and even understanding of policy makers. The report recognizes that fact time and again.
A boxplot of First Nations misery
Over the weekend, Colby Cosh posted this depressing box-and-whisker plot (aka “boxplot”) from statistical data on First Nations communities:
Why did I want to look at this information this way? Because Canada actually performed an inadvertent natural experiment with residential schools: in New Brunswick (and in Prince Edward Island) they did not exist. If the schools had major negative effects on social welfare flowing forward into the future we now inhabit, New Brunswick’s Indians would be expected to do better than those in other provinces. And that does turn out to be the case. You can see that the top three-quarters of New Brunswick Indian communities would all be above the median even in neighbouring Nova Scotia, whose FN communities might otherwise be expected to be quite comparable. (Remember that each community, however large, is just one point in these data. Toronto’s one point, with an index value of 84. So is Kasabonika Lake, estimated 2006 population 680, index value 47.)
On the other hand, and this is exactly the kind of thing boxplots are meant to help one notice, the big between-provinces difference between First Nations communities isn’t the difference between New Brunswick and everybody else. It’s the difference between the Prairie Provinces and everybody else including New Brunswick — to such a degree, in fact, that Canada probably should not be conceptually broken down into “settler” and “aboriginal” tiers, but into three tiers, with prairie Indians enjoying a distinct species of misery. (This shows up in other, less obvious ways in the boxplot diagram. You notice how many lower-side outliers there are in Saskatchewan? That dangling trail of dots turns out to consist of Indian and Métis towns in the province’s north — communities that are significantly or even mostly aboriginal, but that aren’t coded as “FN” in the dataset.)
I fear that the First Nations data for Alberta are of particular note here: on the right half of the diagram we can see that Alberta’s resource wealth (in 2006, remember) helped nudge the province ahead of Saskatchewan and Manitoba in overall social-development measures, but it doesn’t seem to have paid off very well for Indians. This isn’t a surprising outcome, mind you, if you live in Alberta; we have rich Indian bands and plenty of highly visible band-owned businesses, but the universities are not yet full of high-achieving members of those bands, and the downtown shelters in Edmonton, sad to say, still are.
