Quotulatiousness

November 9, 2012

Solving the “tax haven problem” … with military intervention

Filed under: Economics, Europe, Government — Tags: , , , , , , , , — Nicholas @ 12:30

Radley Balko suggested that this is insanity. I agree, but as Dan Mitchell explains, it’s being bruited about by people who should know far, far better:

A former bureaucrat from the European Bank for Reconstruction and Development actually called for the forcible annexation of low-tax jurisdictions, writing in the Financial Times that, “Jersey, Guernsey and the Isle of Man should simply be absorbed lock, stock and barrel into the UK…Andorra, Monaco and Liechtenstein should be given the choice of ending bank secrecy or facing annexation.”

He wasn’t quite so belligerent about Switzerland, perhaps because all able-bodied male citizens have fully automatic assault weapons in their homes. But he did urge financial protectionism against the land of chocolate, yodeling, and watches.

What a bizarre attitude. It’s apparently okay for certain countries to persecute – or even kill – ethnic minorities, religious minorities, political dissidents, homosexuals, and other segments of their populations. Very rarely do people like Mr. Buiter call for annexation or sanctions against such loathsome regimes.

But if a nation has low taxes and a strong human rights policy on financial privacy, then cry havoc and let slip the dogs of war.

November 6, 2012

China’s economic statistics

Filed under: China, Economics — Tags: , — Nicholas @ 11:52

If you’ve been following the blog for a while, you’ll know that I’ve been rather skeptical about the official statistics reported by Chinese government and media sources. I’ve been rather more skeptical about western media outlets that depend on these statistics as if they were issued by the US, Canadian, or British governments — China does not have a stable and transparent way of gathering or compiling economic data, but even more to the point they have significant political reasons for using the reported statistics for political reasons.

In Forbes, Tim Worstall looks at retail car sales in China’s luxury market for a recent example:

For China is a large enough place, and different enough, that you can spin the same statistics any way that you want to. For example, take a couple from today’s new about car sales in the country. Apparently you can now buy the top of the line Bentley on same day service, no wait for delivery […]

The jump in sales was 30% for China. So are car sales slowing down? Or not? Is BMW’s stonkingly good quarter just because they have been filling the dealers’ lots? Is Bentley’s bad one because they did that last quarter? Are BMW counting deliveries to dealers, as the official statistics do, or are they counting true sales?

This is one of the problems with looking at Chinese economic statistics. The place doesn’t necessarily compile all the numbers the same way we do: nor does it necessarily compile them in a consistent manner across the country.

Adam Smith’s “invisible hand”

Filed under: Books, Economics, History, Liberty — Tags: , , , — Nicholas @ 00:01

From LearnLiberty.org

Why are some countries wealthy while other nations are poor? Prof. James Otteson, using the ideas of Adam Smith, explains how the division of labor is a necessary and crucial element of wealthy nations. Additionally, Otteson explains Smith’s idea of the invisible hand, which explains how human beings acting to satisfy their own self interest often unintentionally benefit others.

November 2, 2012

Modern inventory control and Hurricane Sandy

Filed under: Business, Economics, Food, USA — Tags: , , — Nicholas @ 08:53

Unlike major disasters of the past, storm-hit New Jersey and New York City won’t have to face the crippling shortages of food and other essentials in the wake of Hurricane Sandy. The just-in-time food supply chain is proving its versatility yet again:

The day Hurricane Sandy made landfall, the Jersey City, New Jersey, warehouse for food distribution giant Sysco Corp. (SYY) sent out 30,000 cases of food and drinks. Most of the shipments were headed across the Hudson to New York City. On Tuesday, the day after the storm ravaged the city, the warehouse sent out none.

Yet while news of flooding, power outages, downed trees, and other storm-inflicted wreckage abounds, you won’t hear stories of mass starvation in the streets. Food may not be moving in or out of the city, but the data-driven supply chains perfected by some of the world’s biggest companies in the pursuit of profits have become so resilient that even a cataclysm like Sandy registers as little more than a logistical hiccup. While the subways have stopped indefinitely, few in the storm’s path will have to deal with empty shelves for long, if at all.

[. . .]

Wilson says the key adjustment Sysco made ahead of Sandy was to shift shipments to mainly non-perishable goods to ensure customers would have food to last through power outages. The company also prioritized getting orders to institutions that would have to keep large numbers of people fed through the storm, such as hospitals, hotels, airports, shelters, jails, and college campuses. Restaurants will stay near the bottom of the list as the recovery proceeds. But Wilson says the process of getting back to normal won’t drag out. “It’ll be a week or so of business-not-as-usual. But we’ll get back to business-as-usual eventually.”

Large companies like Sysco with nationwide reach and a long history of managing supply chains can adapt quickly to natural disasters because they’ve been there before, and they have the data to show for it. Over the years, as real-time inventory tracking and analysis has become the norm, companies know what people buy before and after disasters. They know how demand has varied between a Gulf Coast hurricane and a New England blizzard. By cross-referencing that granular data with the latest weather predictions, companies can forecast changes in their supply chain needs in parallel with coming storms.

H/T to Charles Stross for the link.

October 31, 2012

The economic problem with recycling is that it’s the inverse of retail value

Filed under: Economics, Environment, Technology — Tags: — Nicholas @ 00:01

Tim Worstall at Forbes:

We all understand how pricing in the retail chain goes. Each unit of something in a shipload of them is worth less than each unit when there’s only a container of them, and so it goes on. As we get closer to the retail point each unit rises in value. As we break down the shipment from tens of thousands of units, to a truckload, then a pallet load, finally to the one single item sitting on the store shelf. If you agree to purchase 5,000 iPads you’ll expect to pay less for each one than if you tried to buy just one.

We get that: the thing about recycling is that pricing works entirely the other way around. To a reasonable approximation the value of one unit of anything for recycling is worth nothing. The value of each of 1,000 units in the same place is higher than that solitary one. One scrap car in the middle of a field isn’t worth much if anything. 1,000 cars in a scrap yard might be worth $300 a tonne for the steel content (don’t take these numbers too seriously by the way, they’re examples only). Precious metals refining, scrap metal, recycling: they all share this same economic point. The more of something you have then the more each unit of that something is worth.

[. . .]

… the way we tend to look at the economics of recycling. We hear a great deal about how recycling plastics, or cooking oil, metals, electronics, you name it we hear the same thing, “saves resources”. Sometimes this is absolutely true. Other times however what we get shown is the value of the actual recycling being done. And we’re not told about the costs of collecting what is to be recycled. And as above it’s those costs of collection that are really the key to the whole enterprise.

Just as an example there’s value in 1,000 tonnes of used plastic bags. Among other things you can burn them in a power station and get some energy. Great: but what is the cost of collecting enough used plastic bags to make 1,000 tonnes? That’s the part that seems not to get into the calculations that our green friends present to us.

Cash4Gold seems to have gone under because the collection costs of the materials were higher than the value of recycling those materials. What’s really rather worrying about the larger recycling movement is that this can be/is often true of other materials. But because we don’t properly account for the collection costs we don’t see this as clearly as we do in the accounts of a (failed) for profit company (OK, would be for profit company).

October 29, 2012

US 3rd quarter GDP number less substantial than it appears

Filed under: Economics, Media, USA — Tags: — Nicholas @ 11:17

A bit of a downer for what would otherwise be good economic news:

Chart from the Mercatus Center at George Mason University.

Twenty million broken windows

Filed under: Economics, Environment, Media — Tags: , , — Nicholas @ 09:03

At Forbes, Tim Worstall patiently explains that the damage from Hurricane Sandy (or any major storm) will appear to boost GDP, because it only measures money spent to repair damage, not the costs incurred or the opportunities foregone because of the damage:

We know very well that Hurricane (or Frankenstorm as some are calling it) Sandy will leave a trail of destruction across parts of the US today. There will almost certainly be deaths, as there have been in the hurricane’s passage across the Caribbean. And there will also be a boost to the US economy. Which is really evidence of quite how wrong we are in the way that we measure the economy.

[. . .]

The problem with this is that it is only true because of the way that we calculate GDP. In our working of the numbers we assume that it’s final consumption at market prices: that is, the value that consumers put on everything. However, this is not true of government spending. It’s very difficult indeed to work out what government spending is actually worth: for as we’ve not a choice in it then there’s no market price nor accurate valuation from the people who actually get whatever is produced. Some government spending is most certainly worth more than the actual amount spent. The court system say: a pre-requisite of our having a complex society at all. Other parts not so much: what is the true value of a diversity adviser for example? So what we actually do is value all government spending, for GDP purposes, at the cost of that actual spending. Government spends $100, GDP goes up by $100. That’s just how we define it. This can cause amusement in measuring the success of welfare programs for example. Even Census admits that some of the people who receive Medicaid, or food stamps, value what they receive at less than the cost of providing it.

[. . .]

Now imagine that Hurricane Sandy does $10 billion of damage to that wealth (for our purposes it doesn’t matter whether it’s $100 billion or $1 trillion. Although this obviously matters to everyone except for the purposes of this example). The US is now worth $99.990 Trillion. GDP might rise to $15.1 trillion as we repair that damage. But we’re not in fact any richer at all: despite the fact that GDP has gone up. What has actually happened is that some of our stock of wealth has been destroyed and we’re having to do more work in order to rebuild it. This is exactly the same as our pollution example. We’re measuring what we produce but not the capital stock of what we have (or had).

Yes, the rebound from Sandy may well provide a boost to the economy. But that’s a function of the way that we measure that economy, not a real boost in our general wealth.

October 21, 2012

QotD: Environmental externalities

Filed under: Economics, Environment, Quotations — Tags: , , , , — Nicholas @ 11:12

That other people place different values upon the environment than I do worries me not in the slightest. It is precisely such differences of opinions about value that make a market. What does annoy me intensely is that almost all of the environmental problems that are currently being complained about have indeed been studied by economists. And they’ve found solutions to them as well. Just about any and every environmental problem is either about externalities or common access to a resource. In many ways these are just the flip side of exactly the same problem. But we do indeed know how to solve each of them and both of them. Hardin on ownership or regulation, Pigou on tax or regulation, both mediated through Coase on transactions costs (with a decent assit from Ostrom on communal ownership). There, that’s it: far from economics ignoring matters environmental economics has solved the damn problems.

So why won’t the environmentalists listen?

Tim Worstall, “Why won’t the environmentalists learn any economics?”, Adam Smith Institute blog, 2012-10-21.

October 16, 2012

Early Baby Boomers had it much easier than those who followed

Filed under: Cancon, Economics, USA — Tags: , , , , , — Nicholas @ 10:44

Depending on where you draw the demographic line, I’m either a (very) late Baby Boomer or an early arrival from the next generation. I “get” the anger that some younger folks feel about the BB’s, because I came along too late to benefit in the same way that the early boomers did:

But, have baby-boomers really enjoyed a cozy ride through life? The truly lucky were their parents, who worked in the post-Second World War “Golden Age” of low unemployment, rapidly rising real wages, rising house prices, and expanding public and private pension plans.

The postwar boom was petering out by the late 1970s and early 1980s, just as many baby boomers were entering the job market. The 1980s and 1990s were marked by two severe recessions, and by an increase in jobs which often did not provide steady wages or a decent pension.

The unemployment rate for the baby-boomers, then mainly in their early thirties (age 30-34), was more than 10 per cent from 1983 to 1985, and over 8 per cent for the boomers in their late thirties during the recession years of 1992 to 1994.

Many baby-boomers never managed to find the secure and well-paid jobs characteristic of the 1960s and 1970s that lay the basis for a decent retirement. A recent study by former Statscan assistant chief statistician Michael Wolfson found that one-in-four middle-income baby boomers face at least a 25 per cent fall in their standard of living in retirement. (He looked at persons born between 1945 and 1970, and earning between $35,000 and $80,000 per year.)

The proportion of all persons age 65 to 70 who are still working bottomed out at 11 per cent in 2000 and is now 24 per cent, and about one half of persons aged 60 to 65 are still working today.

In my entire career, I’ve worked for only one company that provided a pension plan — and I was laid off before my contributions vested anyway. I don’t expect to ever voluntarily retire: I won’t be able to afford it. And I’m far from alone in that.

October 13, 2012

A timely reminder that economic statistics only paint part of the overall picture

Filed under: Economics, Technology — Tags: , , — Nicholas @ 10:52

Tim Worstall at the Adam Smith Insitute blog:

Almost at random from my RSS feed two little bits of information that tell of the quite astonishing economic changes going on around us at present. The first, that the world is now pretty much wired:

    According to new figures published by the International Telecommunications Union on Thursday, the global population has purchased 6 billion cellphone subscriptions.

Note that this is not phones, this is actual subscriptions. It’s not quite everyone because there are 7 billion humans and there’s always the occasional Italain with two phones, one for the wife and one for the mistress. But in a manner that has never before been true almost all of the population of the planet are in theory at least able to speak to any one other member of that population. The second:

    The most recent CTIA data, obtained by All Things D, shows that US carriers handled 1.16 trillion megabytes of data between July 2011 and June 2012, up 104 percent from the 568 billion megabytes used between July 2010 and June 2011.

Within that explosive growth of basic communications we’re also seeing the smartphone sector boom. Indeed, I’ve seen figures that suggest that over half of new activations are now smartphones, capable of fully interacting with the internet.

One matter to point to is how fast this all is. It really is only 30 odd years: from mobile telephony being the preserve of the rich with a car battery to power it to something that the rural peasant of India or China is more likely to own than not. Trickle down economics might have a bad reputation but trickle down technology certainly seems to work.

October 11, 2012

David Suzuki “owes economists an apology”

Filed under: Cancon, Economics, Environment, Media — Tags: , , , — Nicholas @ 09:09

In the Globe and Mail, Mike Moffatt examines Suzuki’s latest attack on the economics profession and finds it extremely unpersuasive:

Popular environmentalist David Suzuki has described conventional economics as a form of brain damage. In a documentary called Surviving Progress, he quotes a fictional economist by saying, “who cares whether you keep the forest — cut it down. Put the money somewhere else. When those forests are gone, put it in fish. When those fish are gone, put it in computers.”

Beyond tarring the economics profession, he displays a perplexing lack of understanding of basic economic concepts. First of all, none of the rules taught in undergraduate economics course advise the owner of a resource to deplete it as quickly as possible. Perhaps he was confused with the Tragedy of the Commons problem, where lack of private ownership causes a resource to be overused.

[. . .]

The idea that economists do not care about externalities is a strange one, given how prominently they are featured in economics textbooks. An externality is, simply put, a spillover effect. It is the unintended costs or benefits from a transaction or decision experienced by third parties (that is, they were external to the decision). It does not mean phenomena that are external to economic modelling or things outside the interest of economists. Since, as Dr. Suzuki points out, the world is full of externalities, the concept is crucial in economic research.

October 9, 2012

Politics and economics: election-style

Filed under: Economics, Politics, USA — Tags: , , , , , , — Nicholas @ 09:32

At the Hit and Run blog, Tim Cavanaugh bewails economic illiteracy:

It’s “very hard to fine-tune an economy” using any tools. That seemed to be a clear lesson of the twentieth century workers’ paradises, and it is implicit when politicians claim (usually following up with a “but”) that the free market is the least-bad system for creating wealth. Spending and taxes can, however, have very destructive effects, and the best way for government to further an enterprise is by the alacrity with which it gets out of its way. As the Clinton-era example shows, you can have a boom even if you just slightly reduce the rate of spending growth. That’s not fine-tuning, it’s slightly easing the heavy hand of the state. The Post’s rhetorical question leaves out such options as “Did they screw it up?” or “Did they do too much?”

You get to this level of fantasy not by knowing too little economics but by knowing too much, by being persuaded that the same math you use when you shop around for bargains or balance your checkbook does not apply at the level of the macroeconomy. Unfortunately, Keynesian logic is like Videodrome: Once exposed to it you can never get rid of it, no matter how much trouble it causes. Nobel Laureate Paul Krugman recently claimed that brisk sales of the iPhone 5 will spur economic growth, thus proving the broken-window theory of economics. In fact, it’s the opposite: People who buy the new phone think it will add value to their lives, not replace an equal amount of value that has been destroyed. As the Apple maps fiasco, the purple glare controversy, and this Jimmy Kimmel video suggest, they may be wrong about that. But that Krugman (who last year called for a hoax invasion by space aliens to spur spending) is down to such a transparently absurd argument suggests the time has never been riper to jettison both the new and old Keynesianism.

Just don’t look for either presidential candidate to do that. Right now the big question is whether Mitt Romney or Barack Obama will use his presidential job-creating powers to create more jobs. Mitt Romney is promising to create 12 million jobs, which strikes me as a strategic error. All Obama has to do is promise to create 13 million jobs and he’ll obviously be the better candidate, because that’s a lot more jobs.

October 5, 2012

sp!ked shorts on the Eurocrisis

Filed under: Economics, Europe — Tags: , , — Nicholas @ 08:12

October 4, 2012

Why EU politicians love the idea of a Financial Transaction Tax

Filed under: Economics, Europe — Tags: , , , — Nicholas @ 10:31

Tim Worstall explains why politicians love the notion of an FTT, and why all the benefits claimed for imposing an FTT are not going to happen:

Large numbers of people have convinced themselves that a Financial Transactions Tax (FTT) would be a really very good idea indeed. It would make the banks pay for the problems they’ve caused, it would lower speculation and thus lower volatility, it would raise a lovely large amount of money that can be spent on good causes and anyway, there are a number of FTTs around and they’ve not caused any problems, have they?

Politically this is of course quite wonderful. Lots of money to pay for things and it’s the banks that have to cough up? We’ll get tens, no hundreds of billions and none of us will really have to pay any of it? Let’s tax the other guy usually does gain public support after all.

The thing is, all of the stated joys of this tax are in fact untrue. I’m rather involved in this as I prepared evidence for the House of Lords on the point (evidence which I’m glad to say heavily influenced their final report). Other submissions also pointed to posts on this very blog here at Forbes in support of various points. Finally, this formed the basis of my one and only peer reviewed paper to date. You might say that I’m more involved in this story than I am in most.

The thing is, those four things which campaigners for the FTT say are the good things about it all turn out to be untrue. Firstly and most obviously, banks are companies and companies never pay tax. It’s always some combination of customers, workers and shareholders who do: for only a real human being can bear the burden of a tax. As to speculation, more speculation lowers price volatility so reducing speculation will increase volatility, not reduce it. An FTT would crimp economic growth and thus would reduce total tax revenue, not increase it and finally, we do indeed have several FTTs currently and also know that they crimp economic growth and thus reduce total tax revenue.

All of these things have been explained by all of the serious people (plus me, who you can regard as serious or not as you wish) who have looked at the question. And yet governments continue to sign up for what they keep being told is a seriously bad idea. They’ve even been told this in terms simple enough for a politician to understand.

The zero-sum trading myth

Filed under: Business, Cancon, China, Economics — Tags: — Nicholas @ 09:44

In Maclean’s, Stephen Gordon decries the undying myth that if one party to a trade is benefitting then the other must be losing:

In The Myth of the Rational Voter, Bryan Caplan argues that the most important obstacles to implementing sound economic policies are not lobby groups or the ability of other special interests to influence politicians, but certain systemic, irrational beliefs of the electorate. This is hardly an encouraging conclusion, but if we needed any more evidence for at least one aspect of his thesis, the CNOOC-Nexen takeover is providing it.

One of the prejudices identified by Caplan is what he calls anti-foreign bias: “a tendency to underestimate the economic benefits of interaction with foreigners.” According to popular (mis)perception, dealing with foreigners is to be mistrusted: if they want something from us, then they must perceive some benefit from the exchange. And if foreigners are gaining, then Canadians must be losing.

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