Quotulatiousness

December 4, 2012

An American view of Canada’s immigration policies

Filed under: Cancon, Economics, Government, USA — Tags: , , , — Nicholas @ 13:11

Shikha Dalmia says that the US could learn useful lessons on immigration policy from Canada:

… Canada’s provincial-nominee program is a model of economic enlightenment. Under this system, 13 provincial entities sponsor a total of 75,000 worker-based permanent residencies a year, and the federal government in Ottawa offers 55,000. Each province can pick whomever it wants for whatever reason—in effect, to use its quota, which is based on population, to write its own immigration policy.

Provinces may pick applicants left over from the federal program. They can also solicit their own applicants from anywhere in the world. In a direct attempt to poach talent from the U.S., some provinces are sponsoring H1-B holders stuck in the American labyrinth.

The government in Ottawa can’t question either the provinces’ criteria or their methods of recruitment. Its role is limited to conducting a security, criminal and health check on foreigners picked by the provinces, which has cut processing time for permanent residency to one or two years—compared with a decade or more in the U.S.

Richard Kurland, a lawyer who is considered Canada’s top immigration expert, notes that provinces use the program for diverse goals such as enhancing existing cultural or ethnic ties with other countries. Not surprisingly, the most popular reason is economic: to augment the local labor market.

The program gives British Columbia the same flexibility to sponsor, say, bricklayers as it gives Ontario to sponsor computer programmers. It doesn’t treat the entire Canadian economy as monolithic and pretend that distant federal bureaucrats can effectively cater to local job markets. (Canada’s federal program is a different story altogether.)

December 1, 2012

The problem with flood insurance

Filed under: Britain, Economics — Tags: , — Nicholas @ 09:57

Talking about a very topical issue in Britain, Tim Harford explains why flood insurance is so expensive for some areas:

I’m not sure this is really an insurance problem.

How could it not be an insurance problem?

It seems to me that there are three kinds of hard-to-insure risks. First, there are unimaginable events, “unknown unknowns”, if you like. Yet floods are all too easy to imagine. Then there are risks that are subject to what economists call adverse selection. To take an extreme example, imagine a town ruled by some all-powerful Mob. Nobody in this town is ever robbed without warning. The Mob will be sure to let you know what’s coming to you and why they think you deserve it.

[. . .]

But that doesn’t sound like a good description of flood risk.

Quite so. Now the third kind of hard-to-insure risk is stuff that’s expensive and happens quite often. I’m trying to buy a house, I’m nearly 40 and so I’m trying to buy insurance for my family in case I die or become too ill to work. This is perfectly possible: it’s just expensive, because it’s not unusual for middle-aged men to get seriously ill. This sounds like a much better description of allegedly uninsurable homes: if there is a one in five chance of a flood, and a flood is going to cost £50,000, don’t expect to pay less than £10,000 a year for flood insurance.

But that’s unaffordable for a lot of people.

Yes, but unaffordability is not uninsurability. It’s insurable but expensive.

Tyler Cowen and Andrew Coyne on The Great Stagnation

Filed under: Books, Economics, Media, Technology, USA — Tags: , , , — Nicholas @ 09:35

Tyler Cowen discusses his book The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick and Will (Eventually) Feel Better. Andrew Coyne (National Post) presents a rebuttal and the pair discuss Cowen’s thesis focusing on issues of productivity, innovation and government policy (moderated by Wendy Dobson).

November 30, 2012

Republicans widely expected to trade “no tax” pledge for promise of future spending cuts PLUS some awesome magic beans

Filed under: Economics, Government, Media, USA — Tags: , , , , — Nicholas @ 11:45

Most of the conservative pundits seem to expect the Republicans to cave in almost immediately and give Obama the tax increases he’s asking for:

1. President Obama is convinced he will walk out of this crisis with an extremely sweet deal. [. . .]

2. Democrats are completely convinced that enough Republicans in Congress will cave and acquiesce to almost everything they want as the cliff approaches. They have some recent historical examples to provide encouragement in this belief.

3. Democrats are completely convinced that if no deal is reached, the Bush tax cuts expire, and sequestration takes effect, Republicans will get most of the blame. This is probably largely correct, but I think they’re whistling past the graveyard on the consequences to an Obama presidency if 2013 dawns with tax hikes, defense-spending cuts, and another recession.

[. . .]

4. For the GOP, a deal on Obama’s terms is probably worse than sequestration. The middle will not suddenly like the GOP a lot more because they embraced tax increases for the rich. Even if they did, it’s unlikely they would gain enough ground to offset the damage such a move will do among a betrayed and enraged party grassroots. As I said this morning, “Once the Republicans become the party of tax increases, why do we need them? They become indistinguishable from the Democrats.”

[. . .]

The biggest obstacle to all of the options for real deficit reduction and real entitlement reform is that the public doesn’t really think they’re necessary; they think a few tax hikes on the rich will do the trick. Perhaps it’s best to let taxes go up for everyone, from the highest earners to the lowest earners, and let the public see how little that changes the numbers.

November 29, 2012

“One economist [said] that his colleagues’ pursuit of happiness was depressing him”

Filed under: Books, Economics, Media — Tags: , , , , — Nicholas @ 09:01

If you read newspapers or magazines, you’ll have noticed a spike in the economics of happiness over the last few years. Everyone seems to be reporting results of happiness surveys from all over … few of whom seem to agree on how to measure it or in some cases even what it is that they’re trying to measure. Claude Fischer talks about this recent boom market:

Bhutan’s Gross National Happiness Commission uses citizens’ reports of their happiness to assess national progress, and former French President Nicholas Sarkozy appointed a Nobel-encrusted commission to study a similar idea; the United Nations places “happiness indicators” on its war-burdened agenda; American science institutions pour money into fine-tuning measurements of “subjective well-being”; and Amazon’s list of happiness books by moonlighting professors runs from The Happiness Hypothesis to Stumbling on Happiness, Authentic Happiness, Engineering Happiness, and beyond.

Since at least the 1950s, academics have analyzed surveys asking people how happy or satisfied they feel. We’ve used fuzzy questions such as, “Taken all together, how would you say things are these days — would you say that you are very happy, pretty happy, or not too happy?” to assess respondents’ morale. We’ve compared, say, women to men and the poor to the rich. Dutch sociologist Ruut Veenhoven started compiling the findings into his World Database of Happiness back in the 1980s.

So what set off the current frenzy? Economists found happiness.

In the decade after 2000, the number of articles on happiness in major economics journals roughly tripled. One economist told me a couple of years ago that his colleagues’ pursuit of happiness was depressing him. Nonetheless, established leaders and bright new scholars turned to the topic and brought with them the funding, media prestige, and political clout of the profession. That a guild which prides itself on scientific rigor and hardheadedness would embrace such a sappy concept measured in such mushy ways is, well, bemusing. Even Federal Reserve Chief Ben Bernanke drew on the new economics of happiness to find the moral for his 2010 commencement address to University of South Carolina graduates: “I urge you to take this research to heart by making time for friends and family and by being part of and contributing to a larger community.”

November 27, 2012

Coyne: Carney’s departure is probably for the best

Filed under: Britain, Cancon, Economics — Tags: , , — Nicholas @ 10:27

Aside from the ousting of Toronto Mayor Rob Ford, the other big story in Canadian media yesterday was the announcement that Bank of Canada governor Mark Carney will be leaving to take over the Bank of England next year:

Inevitably, there are mixed feelings: satisfaction that a Canadian civil servant should be held in such regard abroad; annoyance that a foreign power should feel entitled to raid our highest offices, as if we were their farm team; gratitude for his service; disappointment that he did not finish his term.

On balance, however, the departure of Mark Carney as governor of the Bank of Canada, to take on the same position at the Bank of England, is probably for the best. It will of course be a great loss: he is largely deserving of his exalted reputation. That’s the point: he was becoming too big for the Bank. His ambitions were known to stretch beyond it; his persona was starting to overshadow it. Rock stars and central banks make an uncomfortable fit.

[. . .]

But ultimately, it’s the institution that counts, not the man. The Bank is steeped in talent, and any successor will be able to draw on the same organizational strengths as Carney. And Carney’s own outsized talents, it must be said, were beginning to present a problem, or at least might have. Politically savvy, a natural communicator, possessed of a certain glamour (at least by central banker standards), and young enough to harbour ambitions beyond his current office, it was perhaps inevitable that he should excite speculation about his future plans, without ever intending to.

All the same, it was unhealthy that talk began to turn to the possibility of him running for Liberal leader, and unhealthier still that this was not more firmly squelched, sooner. I’ve no reason to believe he ever seriously considered doing so, but it would have been a terrible business if he had. It is unusual enough for a governor to leave one country’s central bank for another. But for a governor to resign to lead the party seeking to replace the government he had lately served? I do not think the people who were urging this course upon Carney thought this through.

Update: At the Telegraph, Iain Martin reminds Carney’s sudden horde of fans that he’s merely mortal.

Is there any stopping Carney-mania? Those of us who 24 hours ago couldn’t have identified Mark Carney, even if he was wearing a T-shirt emblazoned with “I’m the Governor of the Canadian Central Bank” in 110pt type, now stroke our chins and swap our best Carney insights. He was voted the most trustworthy Canadian in a poll conducted by Readers Digest (Canada). He has four children. He paid $800,000 for his house in Ottawa, apparently, although he undertook $95,000 of improvements. Did they extend out the back or convert the attic? I don’t know, yet. And Canada didn’t have a banking crisis, you know. Only it did, in the 1990s, and the recovery and reorganisation put it in place afterwards left it in good shape ahead of the much bigger financial crisis which hit the US and the UK particularly hard. And Canada knows how to regulate its banks, only that wasn’t actually Carney’s job. This is most of what we know so far.

[. . .]

Now Carney is hailed as “the world’s greatest central banker”. None of this is to knock the Canadian for a second. He seems like a sensible, pragmatic fellow with a good record. It is also pleasing to see a fresh face, someone not from the revolving door cast-list of the British establishment. Although it is worth remembering that he is from the new global establishment, via 13 years at Goldman Sachs and subsequent sessions on panels at Davos.

The UK certainly needs this appointment to work out, but the new arrival deserves continuous scrutiny from sceptical parliamentarians and, yes, from a (hopefully) free press. After all, Mark Carney is a banker, not a magician.

November 24, 2012

Japan’s demographic time-bomb has detonated

Filed under: Economics, History, Japan — Tags: , , — Nicholas @ 11:58

Remember the Japan of the 1970s and 1980s? The world-spanning colossus of economic might? The nation that had Wall Street wetting its collective pants with every bold move?

That was then. This is now:

Less than a quarter-century ago, Japan was the economic envy of the world. In 1989, Tokyo-listed shares represented nearly half the planet’s equity value, while the land beneath the city’s royal palace was worth more than all of California. American nightly news anchors practically misted up when they had to report that Rockefeller Center was turning Japanese.

Two lost decades and massive property- and stock-bubble explosions later, Japan is a one-word cautionary tale. Caught in economic and demographic atrophy — and stewarded by countless false-start prime ministers — the country has become a hub for zombie banks, a generation of disenchanted youth, and fading brands such as Sony, Sharp, and Panasonic.

Last year, for the first time, sales of adult diapers in Japan exceeded those for babies.

Tim Worstall: Cosmic fun-spoiler

Filed under: Economics, Space, Technology — Tags: , , , — Nicholas @ 11:42

Writing in The Register, Tim Worstall brings his evil economist gaze to the SF fan’s irrational belief that asteroid mining is the way of the future:

Isn’t it exciting that Planetary Resources is going to jet off and mine the asteroids? This is every teenage sci-fi geek’s dream, that everything we imbibed from Verne through Heinlein to Pournelle is going to come true!

But there’s always someone, isn’t there, someone like me, ready to spoil the party. The bit that I cannot get my head around is the economics of it: specifically, the economics of the mining itself.

In terms of the basic processing of what they want to do I can’t see a problem at all, just as all those authors those years ago could see how it could be done.

Asteroids come in several flavours, and the two we’re interested in here are the ice ones and the nickel iron ones. The icy rocks, with a few solar panels and that very bright 24/7 sunshine up there, can provide water. That’s the first thing we need in abundance if we’re going to get any number of people up off the planet for any appreciable amount of time. And we’d really rather not be sending the stuff up out of the Earth’s gravity well for them.

It’s also true that those nickel iron asteroids are likely to be rich in platinum-group metals (PGMs). They too can be refined with a bit of electricity, and they’re sufficiently valuable (say, for platinum, $60m a tonne, just as a number to use among friends) that we might be able to finance everything we’re trying to do by doing so.

All terribly exciting, all very space cadet, enough to bring tears to the eyes of anyone who ever learnt how to use a slide rule and, as the man said, once you’re in orbit you’re not halfway to the Moon, you’re halfway to anywhere.

Except I’m not sure that the numbers quite stack up here. I’m sure that the engineering is possible, I’m certain that it’s all worth doing and most certainly believe that we want to get up there and start playing around with other parts of the cosmos over and above Gaia. But, but…

November 17, 2012

The argument for a guaranteed annual income program

Filed under: Cancon, Economics, Government — Tags: , — Nicholas @ 10:16

In the National Post, Andrew Coyne lays out the benefits of instituting a GAI to replace existing poverty programs:

The basic idea behind the GAI is sound: to consolidate a number of federal and provincial programs, some in cash and some in kind, into a single, universal, unconditional cash benefit, delivered through the tax system. The base amount would be modest: perhaps $10,000-$12,000 per person. Critically, it would be taxed back only gradually, say at 25 cents on the dollar, as earned income rises. Compare that to current practice, where benefits are often withdrawn dollar-for-dollar, or in the case of benefits in kind like free dental care or prescription drugs, are denied altogether to those who leave social assistance: an effective marginal tax rate of 100% or more.

You can see why the people who design and administer these systems do this. They’re trying to save money; they want to target assistance only to those who “need” it; they worry what people would do if given the cash to buy what they want, rather than the services government thinks they should have. But the result of all this careful selection and monitoring is not just condescending and intrusive: it effectively punishes people for taking a job, or working longer hours. This is the key insight of the GAI: dependence is created not so much by giving people money when they don’t work — certainly not at $10,000 a year — as by taking it away from them when they do.

So if all of this makes sense, why hasn’t it been done? One barrier is cost. The more gradually you reduce the transfer as income rises, the more paltry the base amount must be to stay within a given limit; conversely, set a more generous minimum, and you have to impose a steeper clawback. Of course, the arithmetic becomes less stark if you include the revenues saved from the programs the GAI would replace. But here you run into other obstacles.

November 16, 2012

Reason.tv: Ladies, We’re Screwed: Why Obama’s Re-election is Bad for Choice

Filed under: Economics, Government, Health, USA — Tags: , , , — Nicholas @ 10:03

Obama’s re-election is great for moms, right? Aren’t we just a bunch of mindless free spenders, so in love with humanity we want to support every cause and child as though they were each our own? Oh, hells no.

From jobs to health care to education, let’s face it ladies, we’re screwed…and not in the much needed 50 Shades of Grey way.

This election all boils down to choice. Because ours are now sadly limited. To make a simplistic sexist argument, how would you like it if you waltzed into the shoe department at Nordstrom’s or Bloomingdale’s and instead of ankle booties and wedges you found one or two styles of sensible, comfortable clogs? To borrow a term from Joe Biden, malarkey!

With the employer mandate, small businesses are now compelled by law to provide health care for their full-time employees. What will this do? Will it bolster families and working moms by offering free medical care to those in need? Hardly!

November 15, 2012

I, Pencil: The Movie

Filed under: Economics, Technology — Tags: , , , — Nicholas @ 11:17

A film from the Competitive Enterprise Institute, adapted from the 1958 essay by Leonard E. Read. For more about I, Pencil, visit www.ipencilmovie.org

November 14, 2012

The “manufacturing fetish”

Filed under: Economics, Media, Politics — Tags: , , , , — Nicholas @ 10:54

John Kay talks about the widespread belief that only manufacturing is “real” in terms of what a national economy produces:

Manufacturing fetishism — the idea that manufacturing is the central economic activity and everything else is somehow subordinate — is deeply ingrained in human thinking. The perception that only tangible objects represent real wealth and only physical labour real work was probably formed in the days when economic activity was the constant search for food, fuel and shelter.

A particularly silly expression of manufacturing fetishism can be heard from the many business people who equate wealth creation with private sector production. They applaud the activities of making the pills you pop and processing the popcorn you eat in the interval. The doctors who prescribe the pills, the scientists who establish that the pills work, the actors who draw you to the performance and the writers whose works they bring to life; these are all somehow parasitic on the pill grinders and corn poppers.

When you look at the value chain of manufactured goods we consume today, you quickly appreciate how small a proportion of the value of output is represented by the processes of manufacturing and assembly. Most of what you pay reflects the style of the suit, the design of the iPhone, the precision of the assembly of the aircraft engine, the painstaking pharmaceutical research, the quality assurance that tells you products really are what they claim to be.

Physical labour incorporated in manufactured goods is a cheap commodity in a globalised world. But the skills and capabilities that turn that labour into products of extraordinary complexity and sophistication are not. The iPhone is a manufactured product, but its value to the user is as a crystallisation of services.

[. . .]

Most unskilled jobs in developed countries are necessarily in personal services. Workers in China can assemble your iPhone but they cannot serve you lunch, collect your refuse or bathe your grandmother. Anyone who thinks these are not “real jobs” does not understand the labour they involve. There is a subtle gender issue here: work that has historically mostly been undertaken by women at home — like care and cooking — struggles to be regarded as “real work”.

November 13, 2012

Denmark discovers that “price elasticity” is a real phenomenon

Filed under: Economics, Europe, Food, Government, Health — Tags: , , , — Nicholas @ 11:24

Denmark is getting rid of its “fat tax” imposed last year, as it has failed to solve the problem it was intended to address:

Gone, by popular demand: Denmark’s fat tax. ‘The fat tax is one of the most maligned we [have] had in a long time’, said Mette Gjerskov, the Danish food and agriculture minister, in a press conference on Saturday announcing the decision to ditch the policy. ‘Now we have to try improving the public health by other means.’

[. . .]

It turns out, unsurprisingly, that slapping taxes on things doesn’t necessarily persuade people to consume less of them. So Danes either went downmarket in their buying habits by buying cheaper products, or popped across the border to Sweden or Germany to buy their fatty foods there instead. The only real effect was to hit the profits of Danish companies. Chastened by the experience, the Danish government has also scrapped plans for a sugar tax, too.

As the OECD notes: ‘The impact of imposing taxes on the consumption of certain foods is determined by the responsiveness of consumers to price changes, ie, price elasticity. However, it is difficult to predict how consumers will react to price changes caused by taxation. Some may respond by reducing their consumption of healthy goods in order to pay for the more expensive unhealthy goods, thus defeating the purpose of the tax. Others may seek substitutes for the taxed products, which might be as unhealthy as those originally consumed. Depending on the elasticity of the demand for the taxed products, consumers will either end up bearing an extra financial burden, or changing the mix of products they consume in ways that can be difficult to identify.’

So, simply from a practical point of view, food taxes — indeed, any sin tax, including extra duty on tobacco or minimum prices for alcohol — can have some unwanted negative consequences while largely failing to achieve their intended aim.

November 11, 2012

The natural lifecycle of a “monopoly”

Filed under: Asia, China, Economics, Technology — Tags: , , — Nicholas @ 12:53

In Forbes, Tim Worstall celebrates the natural end to a “monopoly” — the quasi-monopoly of Chinese exports of rare earth compounds:

These past several years I’ve been shouting to all who would listen that while China does indeed have a stranglehold on current production of rare earths that’s not something that we really need to worry about. For the important thing about rare earths is that they’re not rare (nor earths either). There are plenty of deposits around and we can get all we need from other areas of the world if we should care to.

    The same cannot be said of Kuantan, the Malaysian locale where Lynas plans to build a rare earth processing plant, a type of facility residents and Australian supporters say, in online campaigns, will result in “millions of tonnes of toxic radioactive waste left behind”.

    Residents took Lynas to court in Malaysia, resulting in the suspension of its operating licence. That decision was overturned yesterday.

Lynas is the company desiring to mine the Mt. Weld deposit (a nice rich one it is too). They are going to separate the RE concentrate at that plant in Malaysia. There’s been a vocal campaign against the licensing of that extraction plant and Lynas has, as above, just succeeded in over-turning a previous license refusal. Once up and operating fully the plant should supply some 20,000 tonnes a year of REs. This is a substantial portion of demand outside China: it’s some 15% or so of entire global demand in fact.

And thus we again see how an apparent monopoly isn’t really all that much use to the supposed monopolist. It certainly was true that China supplied 95-97% of the world’s REs. Largely because they were willing to mine and supply at prices that made it not worth anyone else’s while to do so. But when they tried to constrain supply, to exercise that monopoly, instead of being able to exploit us all they simply encouraged the competition that destroys that monopoly.

Markets do indeed work and the only monopoly that can really be exploited is one that isn’t contestable. And an attempted monopoly in something as common as rare earths simply is contestable and thus cannot be exploited.

November 10, 2012

Minimum wage and “living wage”

Filed under: Britain, Business, Economics — Tags: , , , — Nicholas @ 10:47

Tim Harford discusses the image and reality of Britain’s campaign for “living wages”:

Living wage?

The minimum wage, £6.19 an hour for those 21 and over, is a legal obligation. The living wage, £8.55 an hour in London and £7.45 an hour elsewhere, is the result of a very successful publicity campaign and can count Ed Miliband and Boris Johnson among its advocates. There are no legal sanctions for paying less than the living wage, although Mr Miliband did announce plans to “name and shame” those companies who didn’t. Apparently that is helpful, because “name” rhymes with “shame”.

Why do campaigners say that you can’t live on the minimum wage?

Try living on £6.19 an hour and see how you get on.

For an economist you’re getting very high-minded all of a sudden.

I think it’s perfectly reasonable to point out that £6.19 an hour isn’t a lot of money. £8.55 an hour isn’t a lot of money, either, but a lot of people have to get by on less. Unfortunately we economists have to ask awkward questions — for instance, whether these campaigns are likely to help people without much income.

[. . .]

Perhaps we should just raise the legal minimum wage to the same level as the living wage.

Perhaps. Perhaps we should raise the legal minimum wage to a £100m an hour. I think if we did we’d find unemployment might rise. A minimum wage does two things. It will shift money from employers in an imperfectly competitive market to low-paid workers and it will induce some employers to sack workers, even if both employer and employee would prefer a deal struck at an illegally-low wage rate. There’s a case that for the good of low-paid workers, there should be no minimum wage at all. There should be one but it needs to be modest if it isn’t to cause too much unemployment.

Is there any evidence on the right level?

There’s lots, and it is mixed, but on balance it’s in favour of the idea that if you raise the cost of employing people, fewer people will be employed. It is worth bearing in mind that, for a lowly paid worker shifting from job to job, having less work available but at a high hourly rate, isn’t a bad deal. The concern has to be that certain types of people — especially young unskilled workers — will be shut out completely and denied the chance to learn on the job.

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