Quotulatiousness

December 31, 2011

The “Reverse Pelzman” Effect

Filed under: Americas, Bureaucracy, Economics — Tags: , , , — Nicholas @ 10:35

A semi-serious discussion of a real-world experiment in getting rid of driving licenses:

Those of us who are econ geeks will know about the Pelzman Effect. Regulations that supposedly make us safer (say, seatbelts or cycling helmets) don’t actually make us safer as behaviour changes to take account of the new safety. Almost as if there’s what we consider to be an acceptable risk to take and reducing it in one manner just allows us to be silly in another so as to maintain that risk we’re comfortable with. What I didn’t know (but better econ geeks than I might have done already) is that there is a Reverse Pelzman Effect.

Exploiting an interesting natural experiment, the authors of that paper are able to show that we should abolish driving licences. The various States of Mexico found that bribery was impossible to avoid when attempting to gain a licence. So, to varying degrees, they changed their issuance system, some deciding simply not to have them any more. So, of course, death rates from car accidents went up, didn’t they?

Erm, actually, no, they didn’t. Those places that didn’t bother with licences any more, allowing absolutely anyone at all to get in and drive, saw no change in such death rates any different from those that had now (well, hopefully) incorruptible issuance systems.

December 29, 2011

Even his detractors admit that Ron Paul raises questions for the GOP that need to be answered

Filed under: Economics, Government, Military, Politics, USA — Tags: , , — Nicholas @ 11:26

Jonathan Kay, no fan of Ron Paul, points out that his campaign is forcing some otherwise unexamined bits of Republican belief to be hauled out into the light and re-examined:

None of this is particularly surprising given what we already knew about Ron Paul and his oddball views on metal coinage, Pearl Harbor, the Federal Reserve, and a dozen other subjects. The guy is basically your classic American crank. If he hadn’t gotten fixated on Austrian-School laissez-faire economics, Ron Paul probably would be spending his free time studying the Zapruder film frame by frame, or writing letters to local newspapers about water fluoridation.

Yet, for all his weirdness, Ron Paul deserves credit for at least one very real and crucial insight. Of all the Republican candidates, he alone has called out the fundamental contradiction between the GOP’s two dominant obsessions: (a) small government, and (b) American “greatness” (or, as Mitt Romney recently put it, America’s status as “the greatest nation in the history of the earth”). Critics dismiss Paul as an isolationist. But at least he understands that superpowers can’t maintain 11 carrier battle groups, win Afghanistan, protect Israel, take on Iran, out-educate China, and run a humane society, all while disemboweling government.

On many domestic issues, Paul’s views aren’t that much out of step with the his GOP rivals. Paul wants to shut down the Department of Education. So does Michele Bachmann and Rick Perry. Paul wants to close down the EPA. So does Bachmann and Newt Gingrich (and Herman Cain, too, if anyone still cares). Paul, like Gingrich, wants to privatize the Post Office. Paul also opposes abortion, supports the repeal of Obamacare, rejects the idea of man-made global warming, champions English as America’s national language, and strenuously opposes illegal immigration. His only major dissents on social issues are the war on drugs (end it), and gay marriage, which he thinks should be left up to the states (as opposed to being pre-empted outright at the federal level).

[. . .]

What Ron Paul is doing, for those who can ignore his crankish ramblings about the gold standard and Letters of Marque and Reprisal, is creating a debate about the fundamental meaning of American greatness. Personally, I believe that his ideas about foreign policy are unrealistic and unsettling. But at least he is doing something that neither Mitt Romney nor Newt Gingrich nor Rick Perry has the courage to do: Acknowledge that American global leadership carries a price tag that, ultimately, must be paid with higher taxes and bigger government.

December 27, 2011

Retirement age will have to rise: The Economist

Filed under: Economics, Government, Health — Tags: , , , — Nicholas @ 10:38

In a development that should surprise nobody at all, governments around the world are slowly, reluctantly, grudgingly starting to make changes to their state pension systems:

Put aside the cruise brochures and let the garden retain that natural look for a few more years. Demography and declining investment returns are conspiring to keep you at your desk far longer than you ever expected.

This painful truth is no longer news in the rich world, and many governments have started to deal with the ageing problem. They have announced increases in the official retirement age that attempt to hold down the costs of state pensions while encouraging workers to stay in their jobs or get on their bikes and look for new ones.

Unfortunately, the boldest plans look inadequate. Older people are going to have to stay economically active longer than governments currently envisage; and that is going to require not just governments, but also employers and workers, to behave differently.

December 20, 2011

Next on the protest agenda: Occupy Xmas

Filed under: Economics, Liberty, Media, Politics — Tags: , , , , — Nicholas @ 08:33

Patrick Hayes talks about the new agenda item for the self-declared 99%:

At a time when Occupy protesters are closing up camps the world over — either due to force by the authorities or because it’s too cold to protest outside — the widely acknowledged founders of the Occupy movement, Vancouver-based magazine AdBusters has claimed protesters’ next move should be to ‘Occupy Christmas’. The rationale for this, is as follows: ‘You’ve been sleeping on the streets for two months pleading peacefully for a new spirit in economics. And just as your camps are raided, your eyes pepper-sprayed and your head’s knocked in, another group of people are preparing to camp-out. Only these people aren’t here to support Occupy Wall Street, they’re here to secure their spot in line for a Black Friday bargain at Super Target and Macy’s.’

What bastards the 99 per cent are! Occupy protesters have experienced an ordeal akin to Christ being nailed to the cross, and all the greedy, selfish, Judas-like masses want to do is shop! The new Occupy protests began on Black Friday (the day after Thanksgiving) in the US last month, where goods are heavily discounted in shops in an attempt to kick-start spending and get shops’ P&L sheets ‘into the black’ in the run-up to Christmas. Occupy protesters left their tents and headed to the malls to tell consumers — or ‘cum-sumer whores’ as some protesters put it in their leaflets — to stop buying Christmas presents at discounted prices for their loved ones.

The idea behind this, as AdBusters — renowned also for founding Buy Nothing Day — noted is that ‘Occupy gave the world a new way of thinking about the fat cats and financial pirates on Wall Street. Now let’s give them a new way of thinking about the holidays, about our own consumption habits… This year’s Black Friday will be the first campaign of the holiday season where we set the tone for a new type of holiday culminating with #OCCUPYXMAS.’

December 19, 2011

Kelly McParland: “Norwegians are the most revoltingly perfect people in the world”

Filed under: Bureaucracy, Economics, Europe, Food — Tags: , , , , — Nicholas @ 14:24

Don’t worry, my Norwegian friends, it’s just small-minded Canadian jealousy that you tend to beat us in all the “Smug Country” polls and your national monopoly is even more constricting and incompetent than our equivalent national monopoly:

Everyone knows the Norwegians are the most revoltingly perfect people in the world.

They consistently top all lists of Things Good Countries Do.

They give more to foreign aid than just about any other country in the world. Countries are supposed to give 70¢ for every $100 of national production, but hardly any do. Norway gives about 40% more than the benchmark. They’re sitting on hundreds of billions of dollars in oil profits, and instead of blowing it on short-term expediencies (like a certain western province we could mention) they squirrel a lot of it away in an investment fund to help maintain their high standard of living when the oil runs out. And believe me, their standard of living is high: a cradle-to-grave nannyism that revolts conservatives but seems to work for Norwegians. (In Norway, life is so soft that even cows are required to have rubber mats in their stalls so they can rest comfortably between shifts).

They’re so perfect they’re annoying. Even Swedes get tired of hearing about them. So it’s kind of fun to read about how they’ve completely buggered up their supply management system, so that the entire country has been stripped of its butter supply just as Christmas arrives and everyone gears up to make lots of stuff for which butter is required. And if it reminds you of Canada’s own supply management system (think: dairy products and Quebec), all the better.

Chiquita, supporter of narco-terrorist groups, calls for a boycott of Canadian oil

Filed under: Americas, Cancon, Economics, Food, History — Tags: , , , , , , — Nicholas @ 11:39

When corporate social media goes wrong:

I used to work for an ad agency, and I often had animated discussions with my colleagues about the danger of confusing cause marketing with product marketing. I have always maintained that they are separate disciplines that don’t mix, while many of my colleagues disagreed.

As a society, we have become distressingly pious and self-righteous — and as a natural consequence advertisers wish to capitalize on this instinct. Like my erstwhile colleagues, they see this as an easy path to identifying their product with a strong public sentiment. This is such a bad idea that it merits a blog entry of its own, but what lead me to write today was a satisfyingly spectacular self-immolation by a large American brand that managed to make the wrong choice in just about every decision their communications and marketing teams have made over the past few days.

[. . .]

Worse, Chiquita Brands seemed to forget completely about their Canadian market. It’s easy to underestimate Canada. It’s a little country with a tenth the population of the United States. On the other hand, it’s a terrific export market, and much too accessible and rich to be ignored.

Canadians are understandably touchy about the Oil Sands. The majority of Canadians are very proud of the fact that they’ve transformed the country into an energy superpower by successfully accessing a resource that was considered nearly worthless only a decade ago – and they have done this with unprecedented care, investing billions of dollars in developing new technologies to protect the environment. Canadians are also very proud of the fact that they are the only net exporter of oil that is a liberal democracy and respects human rights. They’ve even coined the phrase “ethical oil” to describe their unique approach to oil production.

What Chiquita Brands succeeded in doing with their announcement was to make millions of Canadian consumers very unhappy. People who couldn’t have told you on Monday morning what brand of bananas they bought were determined by Thursday afternoon that it wouldn’t be Chiquita. Worse yet, hundreds of consumers decided to make their feelings known by commenting on the Chiquita Bananas Facebook page. And this is where Chiquita’s marketing and communications team took one bad decision and turned it into a disaster

H/T to Five Feet of Fury for the links.

December 17, 2011

Megan McArdle: There is no “quick fix” for poor communities

Filed under: Economics, Government, Liberty, USA — Tags: , , , — Nicholas @ 11:23

If the “nudge” notion of government worked, it’d be pretty creepy:

If poor people did the stuff that middle class people do, it’s possible — maybe probable — that they wouldn’t be poor. But this is much harder than it sounds. As John Scalzi once memorably put it, “Being poor is having to live with choices you didn’t know you made when you were 14 years old.” Which often means, he might have added, spending your whole life doing the sort of jobs that middle class people sometimes do when they’re 14. It isn’t that people can’t get out of this: they do it quite frequently. But in order to do so, you need the will and the skill — and the luck — to execute perfectly. There is no margin for error in the lives of the working poor.

And some problems are collective problems. It’s all very well to say that poor women shouldn’t have kids unless they can find a solid man to help raise them. (And I agree that this is a superior strategy). But men with solid jobs are rather scarce in many poor communities, not least because we’ve imprisoned so many of them. What you’re asking poor women to do is actually, for most of them, to not have babies. This is an easy edict to deliver from a comfortable middle class home where you have all the kids you want. It probably sounds pretty shitty, however, to the poor women who you are blithely commanding to spend their lives alone.

[. . .]

What I am struggling to say is that however much those choices are now inflected by what went before — and the problems of other people in their families and communities — they are choices. We understand that the middle class girl I grew up with is driving her situation by behavior that is probably not very amenable to outside influence. Why do we assume that people who grew up poor are somehow more pliable simply because similar choices are influenced by decades of generational poverty?

As adults they are the products of everything that has happened to them, and everything that they have done, but they are also now exercising free will. If you assume you know the choice they should make, and that there is some reliable way to entice them to make it, you’re imagining away their humanity, and replacing it with an automaton.

Having higher wage jobs available would give people more money which would be a good thing, and it would solve the sort of problems that stem from a simple lack of money. But it would not turn them into different people.

Public policy can modestly improve the incentives and choice sets that poor people face — and it should do those things. But it cannot remake people into something more to the liking of bourgeois taxpayers. And it would actually be pretty creepy if it could.

December 15, 2011

James Delingpole on Great Britain, the Green Movement, and the End of the World

December 14, 2011

Your disturbing chart of the week

Filed under: Bureaucracy, Economics, Education, USA — Tags: , , , — Nicholas @ 09:18

Source: Cato Institute.

December 13, 2011

Japan’s even-worse-than-Greek debt situation

Filed under: Economics, Japan — Tags: , , , — Nicholas @ 12:13

By way of Monty’s daily DOOOOOOM post, here’s some disturbing information on Japan’s eyewatering debt situation:

It seems “debt,” “Greece,” “crepe,” or any other words that might relate to the current Euro crisis prompts a flurry of activity on stocks around the world. But if you thought Greece’s and Italy’s debts were high, there exists a country with an even higher debt-to-GDP ratio. Surprisingly, it also has some of the lowest government bond rates in the world. Let’s take a look at this macro mystery.

Japan’s 2011 gross public debt as a percentage of GDP is estimated by the IMF at 234%. Compare this to down-but-not-yet-out Greece’s at 139% and Italy’s at 119%, and the United States’ at 99%. With those numbers, you may ask how Japan hums along while investors berate Europe for their lack of strict budget controls and U.S. politicians wrestle to cut the deficit.

This is because of one main difference: 95% of Japan’s debt is Japanese-owned. Compare this to Greece, which owns 29% of its debt. The Japanese have been happy to fund their government at incredibly low bond rates, currently around 1.1% for a 10-year bond. Why don’t the Japanese invest elsewhere for higher returns? For one, Japan likes to keep its yen in the country. This is due to a natural bias to favor one’s domestic investments (home bias), the strength of the yen, and domestic institutions’ required participation in bond auctions. Also, it’s difficult to find domestic positive returns. The Nikkei, since Japan’s trouble in the early 1990s, has lost about half its value

Canada’s withdrawal from Kyoto was inevitable from the beginning

I was against the Kyoto agreement from the start, but the government of the day had to be seen to be more “green” than the Americans. John Ibbitson explains:

The Harper government’s decision to withdraw from the Kyoto Protocol tarnishes Canada before the world. Liberal and Conservative incompetence and mendacity are to blame. You and I are to blame. And Lehman Brothers had something to do with it as well.

It isn’t easy for a country to descend, in the space of a single decade, from crusader to pariah, as Canada has done on the environment. But our political leaders were up to the task.

The first, worst mistake occurred at Kyoto itself in 1997, when then prime minister Jean Chrétien told Canadian negotiators to meet or beat the American commitment, whatever it took. The problem was that while the American commitment was ambitious, Bill Clinton never expected the Senate to ratify that commitment, and he was right.

The Liberals found themselves stuck with Draconian targets that, if met, would hobble oil sands production, hammer big industry in Ontario, and send home-heating bills through the roof. Their solution was to study the issue. And study. I remember sitting through an interminable briefing in 2003, in which officials patiently explained how Canada would meet its Kyoto targets. The only problem was that there was this enormous gap, which was to be closed through “future reductions.” It was like having a household budget in which Miscellaneous was bigger than Mortgage.

Given the hammering that British PM David Cameron has been taking in the British press, he should send a bouquet of flowers to Stephen Harper for giving the media a different villain to abuse.

Update: Stephen Gordon says the same thing: inevitable from the beginning.

Notwithstanding economically illiterate attempts to pretend otherwise, higher consumer prices for GHG-emitting goods and services are an essential component of any serious attempt to reduce emissions. Counting on people to reduce GGE emissions out of the goodness of their hearts was the strategy of the Chrétien-Martin Liberal governments, and adopting this policy made Canada’s Kyoto failure inevitable long before Stephen Harper’s Conservatives came to power.

Political parties rarely win when they campaign on a platform that promises to increase the price of fossil fuels — the Progressive Conservative government of Joe Clark lost power in large part because of its proposal to increase the gasoline excise tax by 18 cents a gallon (4 cents a litre).

Update, the second: Oh, it’s okay, apparently we’re not allowed to abandon the “voluntary” agreement:

Remember how this was phrased? “sign it, it’s just voluntary!”

Recall Rio 1992 “Earth Summit” where the meme was “hey, it’s voluntary! … with a negotiating schedule attached”. Apparently, like a Roach Motel, “countries check in but they can’t check out”. This email is from UNFCCC’s list server and note my bolded section below. The arrogance, it burns.

[. . .]

    “I regret that Canada has announced it will withdraw and am surprised over its timing. Whether or not Canada is a Party to the Kyoto Protocol, it has a legal obligation under the Convention to reduce its emissions, and a moral obligation to itself and future generations to lead in the global effort. Industrialized countries whose emissions have risen significantly since 1990, as is the case for Canada, remain in a weaker position to call on developing countries to limit their emissions.”

The Zero Sum Fallacy

Filed under: Economics, Humour — Tags: , , , , — Nicholas @ 09:02

P.J. O’Rourke on the big economic issue that the Occupy folks always get wrong:

The “Occupy This, That and the Other Place” people are right about the sins of the financial system and right about the evil of government supporting and subsidizing this malfeasance. It’s not fair that 1 percent of Americans are rolling in dough while the rest of us are scrimping to pay for our Internet connection so we can go on Groupon.

But the Occupiers are wrong about something much more important. They believe in the Zero Sum Fallacy — the idea that there is a fixed amount of the good things in life. Anything I get, I’m taking from you. If I have too many slices of pizza, you have to eat the Dominos box. The Zero Sum Fallacy is a bad idea — dangerous to economics, politics, and world peace. It means any time we want good things we have to fight with each other to get them. We don’t. We can make more good things. We can make more pizza — or more tofu, windmills and solar panels, if you like.

The Zero Sum Fallacy is just that, a fallacy. Economic history since the Industrial Revolution proves — be the rich however stinking rich — we ordinary people can make more of the good things in life. But we have to make them ourselves, with our knowledge, skills and hard work. Government can’t give us good things. Government doesn’t make things, it just redistributes them. This brings us back to fighting with each other.

December 12, 2011

Defining crony capitalism

Bill Frezza explains what crony capitalism is and how it differs from free market capitalism:

If defenders of capitalism hope to win over fair-minded fellow citizens who are honestly upset and confused, we need to define these terms and answer some basic questions. In what ways are Crony Capitalists and Market Capitalists the same and in what ways are they different? What makes the former immoral and the latter virtuous? Why are Crony Capitalists a threat to democracy and prosperity while Market Capitalists are essential to both? How is it that ever larger numbers of Market Capitalists are being corrupted, turning into Crony Capitalists? And what can we do to reverse that trend?

All capitalism is driven by greed — the desire to not only achieve economic security, but to amass pools of capital beyond one’s basic needs. This capital can fuel the kind of conspicuous consumption that offends egalitarians. But it also finances investments in new products and businesses, without which the economy cannot grow. [. . .]

What makes Crony Capitalists different is their willingness to use the coercive powers of government to gain an advantage they could not earn in the market. This can come in the form of regulations that favor them while hindering competitors, laws that restrict entry into their markets, and government-sponsored cartels that fix prices, grant monopolies, or both.

Crony Capitalists are also more than happy to help themselves to money from the public treasury. This can come from wasteful or unnecessary spending programs that turn government into a captive customer, subsidies that flow directly into their coffers, or mandates that force consumers to buy their products.

[. . .]

Beyond these obvious Crony Capitalists lies a slippery slope designed to attract and entrap Market Capitalists: the tax code. By setting nominal corporate tax rates high while marketing tax breaks to specific companies and industries, Congress assures itself a steady stream of campaign contributions from companies looking to lighten their tax load. While there is no shame in reducing one’s tax burden from 35% to a more globally competitive 20%, is it any wonder that people get sore when some extremely profitable corporations manage to get their tax burden down to nearly 0%?

December 10, 2011

Barack Obama and Teddy Roosevelt: the economic parallels

Filed under: Economics, History, USA — Tags: , , , , — Nicholas @ 12:12

Jim Powell looks more deeply at the similarities between Barack Obama and Theodore Roosevelt:

President Obama is a smart man who believes great wealth is a social problem, and ordinary people would be better off if wealth were substantially taxed away. Recently he drew inspiration from Theodore Roosevelt, another smart man who had a similar view, completely misinterpreted what was happening in the economy, and actively disrupted it.

Theodore Roosevelt was the man who, in 1906, encouraged progressives to promote a federal income tax after it was struck down by the Supreme Court and given up for dead. He declared that “too much cannot be said against the men of great wealth.” He vowed to “punish certain malefactors of great wealth.”

Perhaps TR’s view was rooted in an earlier era when the greatest fortunes were made by providing luxuries for kings, like fine furniture, tapestries, porcelains and works of silver, gold and jewels. Since the rise of industrial capitalism, however, the greatest fortunes generally have been made by serving millions of ordinary people. One thinks of the Wrigley chewing gum fortune, the Heinz pickle fortune, the Havemeyer sugar fortune, the Shields shaving cream fortune, the Colgate toothpaste fortune, the Ford automobile fortune and, more recently, the Jobs Apple fortune. TR inherited money from his family’s glass-importing and banking businesses, and maybe his hostility to capitalist wealth was driven by guilt.

Like Obama, TR was a passionate believer in big government — actually the first president to promote it since the Civil War. He said, “I believe in power … I did greatly broaden the use of executive power … The biggest matters I managed without consultation with anyone, for when a matter is of capital importance, it is well to have it handled by one man only … I don’t think that any harm comes from the concentration of power in one man’s hands.”

December 9, 2011

Basic rule of political economics: subsidies result in higher costs

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

Virginia Postrel explains how federal funding to university students has created price inflation among universities:

As veteran education-policy consultant Arthur M. Hauptman notes in a recent essay: “There is a strong correlation over time between student and parent loan availability and rapidly rising tuitions. Common sense suggests that growing availability of student loans at reasonable rates has made it easier for many institutions to raise their prices, just as the mortgage interest deduction contributes to higher housing prices.”

It’s a phenomenon familiar to economists. If you offer people a subsidy to pursue some activity requiring an input that’s in more-or-less fixed supply, the price of that input goes up. Much of the value of the subsidy will go not to the intended recipients but to whoever owns the input. The classic example is farm subsidies, which increase the price of farmland.

[. . .]

This doesn’t mean that colleges capture all the aid in higher tuition charges, any more than capital-equipment companies get all the benefit of investment tax credits. But it does set up problems for two groups of students in particular. The first includes those who don’t qualify for aid and who therefore have to pay the full, aid-inflated list price. The second encompasses those who load up on loans to fill the gaps not covered by grants or tax credits only to discover that the financial value they expected from their education doesn’t materialize upon graduation.

That’s the situation many young people find themselves in today, which is one reason for their anger. The other is a widespread feeling, which the recession has intensified, that higher education is unfairly insulated from the everyday competitive pressures most people have to cope with. Instead of having to find ways to operate more efficiently and deliver ever-more value without raising costs, the way private-sector managers do, college administrators seem able to pass higher and higher bills on to their customers and the public.

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