Quotulatiousness

January 26, 2012

The fate of London’s diesel locomotive plant

Filed under: Cancon, Economics, Media, Politics, Railways — Tags: , , , , , — Nicholas @ 10:38

In the Toronto Star, Martin Regg Cohn (who claims he “is not an anti-globalization crusader”) does his level best to put forward a case for massive government intervention in a labour dispute between Caterpillar and the Canadian Auto Workers:

At the old locomotive plant now owned by U.S.-based multinational Caterpillar Inc., the Canadian Auto Workers union is not even on strike. The CAW has been locked out since New Year’s Day because it refused to sign its own death warrant by agreeing to slash wages in half for most workers from $34 an hour to $16.50.

When a powerful multinational negotiates in bad faith, it becomes a story that governments in Queen’s Park and Ottawa can no longer wash their hands of. To put it in language that resonates with Premier Dalton McGuinty: When a bully tries to humiliate people, you can’t just watch in silence.

When high-paying skilled local jobs can be shredded at the whim of a combative multinational giant, it dramatically undermines all the upbeat rhetoric we hear from McGuinty and Prime Minister Stephen Harper about Canada’s global appeal. It sends a signal that Ontario is not so much open for business as it is closed for unions.

We jump directly from Caterpillar’s demand for wage reductions to an assertion that the company is negotiating in bad faith (I guess, from the union’s point of view, anything other than a wage increase is proof). No indication whether the company’s demand is economically justifed — if sales of the plant’s railway locomotives are as bad as the wage offer implies, then the next step will be closing the plant — just straight over to bad-mouthing the company.

And, of course, it’s merely objective reporting to use pejorative descriptors when discussing the eeeeevil multinational firm. Not content merely to malign the company, he then calls on the Premier to support the union to the hilt:

So what can our anti-bullying premier do?

If I were McGuinty, I would ask myself a simple question: What would Bill Davis do?

The former Tory premier of Ontario wasn’t perfect, but he was always plugged in. He took labour seriously, listened closely to business and wooed foreign investors (remember Renault?). He knew how to leverage the power of the premier’s office to stand up for Ontario’s greater interests.

A phone call to Caterpillar’s corporate braintrust would show that Ontario’s premier is no pushover. If that didn’t work, a phone call to Harper — who is still trying to live down the tax breaks he gave the locomotive factory’s former owners a few years ago — might find a receptive ear.

And finally we get to a good point: the foolishness of governments in giving special tax breaks to certain industries or companies. If it’s in the company’s best interests to locate in your jurisdiction, they’ll probably do it. If you have to bribe them with tax breaks, low-interest or interest-free loans, or other special incentives, then once the incentive runs its course, the company has no further requirement to stay in your location.

Update: In the National Post, Kelly McParland has some suggestions for union leaders:

1. A lot of people (the membership figures suggest it’s the vast majority) think unions are concerned solely with their own members and couldn’t give a bird’s turd for anyone or anything else, including other working stiffs, members of other unions, the fortunes of the company they work for or the customers they deal with. When you display a total lack of interest in others, they generally adopt the same attitude towards you.

[. . .]

4. Union politics might consider moving out of the stone age. The world evolves over time, but unions persist in peddling the same trite bromides as if it’s still the dawn of the industrial revolution. The “us against them” mentality; the pretense that all employers exist to exploit workers and can never be trusted; the assumption that every contract must be succeeded by an even richer one no matter the health of the industry, the economy or the company; the fealty to leftwing political parties — all are symptoms of an exhausted, outdated perspective that has barely changed since “modern technology” meant the telephone.

If unions really want to save themselves, they might take a lesson from the market economy. If no one buys what you’re selling, it’s not because they buyers aren’t bright enough. It’s because people see no value in your product.

Update, 3 February: The plant is being closed. Here’s the official announcement:

Progress Rail Services has announced that it will close Electro-Motive Canada’s (EMC) locomotive production operations in London, Ontario.

Assembly of locomotives will be shifted from the London facility to the company’s other assembly plants in North and South America, which will ensure that delivery schedules are not impacted by the closing of the London facility.

All facilities within EMC, EMD and Progress Rail Services must achieve competitive costs, quality and operating flexibility to compete and win in the global marketplace, and expectations at the London plant were no different.

The collective agreement and cost structure of the London operation did not position EMC to be flexible and cost competitive in the global marketplace, placing the plant at a competitive disadvantage. While the company’s final offer addressed those competitive disadvantages, the gulf between the company and the union was too wide to resolve and as such, market conditions dictate that the company take this step.

January 25, 2012

The Cato Institute response to the State of the Union 2012

Filed under: Economics, Education, Government, Liberty, Politics, USA — Tags: , , , , — Nicholas @ 12:00

Gary Johnson responds to the State of the Union address

Filed under: Economics, Government, Liberty, Politics — Tags: , , , — Nicholas @ 11:46

This was sent out from Gary Johnson’s campaign in response to President Obama’s State of the Union speech last night:

“If the idea tonight was that the President would fulfill his constitutional duty to give us ‘information of the State of the Union’, we should be able to expect some truth. I didn’t hear much truth. Truth is that the real unemployment rate is probably still above 10%. Truth is that after all the hand-wringing and deals of the past couple of years, instead of cutting spending, the President and Congress are going back to the well for another $1.2 Trillion debt limit increase. And the truth is we are seeing nothing from either the President or the Republicans that will really change any of those unacceptable realities.

“Only in the twilight zone that is Washington could a President who has bailed out and stimulated our economy to death stand in the Capitol and declare there should be ‘no bailouts, no handouts, and no cop-outs’. Can anyone spell GM or TARP or Solyndra?

“The President said we deserve a government that plays by the same rules as millions of hard-working Americans. Perhaps that should begin with the government not borrowing and printing 43 cents of every dollar it spends — something hard-working Americans can’t and don’t do.

“Until we see a real plan — not a Washington smoke and mirrors plan — that puts a stop to deficit spending and really puts America back to work, all of this rhetoric is just wasted breath.”

Gary Johnson’s campaign website is www.garyjohnson2012.com.

January 22, 2012

The real story of The King’s Speech

Filed under: Australia, Britain, Economics, History, Media — Tags: , — Nicholas @ 12:13

I was going to just tack this on as an update to the last entry (as it’s the same author and a kinda-sorta similar topic), but it deserves to be in its own post. Colby Cosh on the historical reality behind the movie The King’s Speech:

I got the book The King’s Speech for Christmas and just finished it; in the very wide field of “slender material adapted into a thrilling hit movie, on whose strength it is then flogged”, it must be some kind of record-breaker. I enjoyed the book, as a reader with about a degree-and-a-half in European history and a keen interest in the pre-war period, but I do not have the creative imagination to have imagined it as fodder for Hollywood. The plain fact is that Lionel Logue scored his big breakthrough in treating the Duke of York (the future King George VI) very quickly, taking a matter of literally a few weeks in late 1926 to help him overcome his stammer and to raise his oratorical abilities to a standard of adequacy. After that time, Logue was consulted very occasionally, serving the King as a sort of good-luck totem on major occasions like the Coronation.

The men obviously got on well, and for decades His Majesty treated Logue with a touching solicitude. Logue’s life was otherwise uneventful. As even the most unschooled reader must have intuited, most of the stuff of the movie — the shouting match in the street, the poignant reconciliation, the surprise royal visit to Logue’s home — is a fairy tale.

But it’s a rare article by Colby that doesn’t include a juicy bit of economics:

It was only with the return of Australian soldiers from the First World War that Logue’s calling as an elocution teacher began to tilt, almost imperceptibly, toward the bailiwick of medicine. Like chiropractors of today, he was ostensibly able to assist some afflicted people for whom scientifically validated medical care cannot do much good. His looks, along with a bit of actor’s training, must have helped a great deal.

(Incidentally, after Logue climbed to the top of the new discipline with royal help, he shrewdly pulled the ladder up after himself, employing George VI in an effort to establish standards and licensing criteria he could never himself have met when he was starting out. Public-choice economists will find this a textbook example of how health cartels establish “restricted entry” barriers.)

January 21, 2012

Robert Johnson: How to save Economics

Filed under: Economics, Education, History, Media — Tags: , , , — Nicholas @ 11:10

Writing in Time, Robert Johnson has a few recommendations to rescue the field of economics from its current state:

First, economists should resist overstating what they actually know. The quest for certainty, as philosopher John Dewey called it in 1929, is a dangerous temptress. In anxious times like the present, experts can gain great favor in society by offering a false resolution of uncertainty. Of course when the falseness is later unmasked as snake oil, the heroic reputation of the expert is shattered. But that tends to happen only after the damage is done.

Second, economists have to recognize the shortcomings of high-powered mathematical models, which are not substitutes for vigilant observation. Nobel laureate Kenneth Arrow saw this danger years ago when he exclaimed, “The math takes on a life of its own because the mathematics pushed toward a tendency to prove theories of mathematical, rather than scientific, interest.”

[. . .]

The third remedy for repairing economics is to reintroduce context. More research on economic history and evidence-based studies are needed to understand the economy and overcome the mechanistic bare-bones models the students at Harvard objected to being taught.

[. . .]

Fourth, we must acknowledge the intimate, inseparable relationship between politics and economics. Modern debates about who caused the financial crisis — ­government or the private financial sector — are almost ­nonsensical. We are living in an era of money politics and large powerful interests that influence the laws and regulations and their enforcement. In order to catalyze the evolution of economics, research teams would benefit from multidisciplinary interaction with politics, psychology, anthropology, sociology and history.

H/T to Tim Harford for the link.

Those aren’t rules of economics. These are rules of economics!

Filed under: Economics, Gaming, Humour — Tags: , — Nicholas @ 00:07

The D&D rules of economics:

These are the Rules of Fantasy Economics:

Rule 1: Everyone has roughly the exact same amount of money and/or property as everyone else of his or her respective experience-point total. Except at character creation, obviously, where some people totally get the shaft, which sucks … but “being poor” and “staying poor” are two very different things.

Only about 99.9% of all people — specifically those who lack the initiative to spend every dollar they own on studded leather and a knife and to abandon their families for the open road on a mad, bloodthirsty whim — ever really STAY poor.

[. . .]

Rule 2: Money cannot make more money. Investing in businesses is a fool’s bargain: stores burn down, castles crumble, merchants and/or bandits will constantly steal your shit, and you will never, ever make a dime. Ever.

It is far wiser to invest in non-depreciable items like swords, hats and magic boots. Likewise, the things that you need to do your job (boats, armor, weapons, rope and horses, for example) do not depreciate at all and may be used forever unless somehow completely destroyed.

Rule 3: All currencies of all countries are worth almost exactly the same amount — and all currencies of all countries are evenly divisible into platinum, gold, silver and copper pieces by factors of exactly ten. No other non-magical objects have any real value, including land.

The exceptions to this rule are gems, which are randomly & subjectively priced (and therefore effectively useless as trade goods) and ‘art objects’, presumably meaning paintings and such, the value of which are objectively determined, fixed and unchangeable, making them a lot like personal checks.

January 20, 2012

Renewable energy: the ethanol scam writ even larger

Filed under: Economics, Politics, Technology — Tags: , , , — Nicholas @ 11:24

Patrick J. Michaels looks at what he calls the “Great Renewable Energy Scam” and shows what happened with the ethanol fuel program which preceded the current programs:

… here in the U.S. there are some 30 different statewide “renewable portfolio standards” (RPSs) that also mandate pricey power, usually under the guise of fighting dreaded global warming.

RPSs command that a certain percentage of electricity has to come from wind, solar, geothermal, or biomass. Given that this power generally costs a lot more than what comes from a modern coal or gas plant, your local utility passes the cost on in the form of higher bills, which the various state utility commissions are only too happy to approve in the name of saving the planet.

[. . .]

One needs to look no further than ethanol as a motor fuel, mandated by the feds. Sold as “renewable” and reducing pernicious carbon dioxide emissions, it actually produces more in its life cycle than simply burning an equivalent amount of gasoline. It also — unconscionably — consumes 40% of U.S. corn production, and we are the by far the world’s largest producer of this important basic food.

The popular revulsion against ethanol has succeeded in cutting its massive federal subsidy, of $0.54 per gallon, which ran out on Dec. 31. But that doesn’t stop the federal mandate. Last year it was for roughly 14 billion gallons from corn and it will be nearly 15 billion in 2012. By 2022, up to 20 billion gallons will be required — all from corn — unless there is a breakthrough in so-called “cellulosic” ethanol, which, no matter how much money the government throws at it, hasn’t happened. Indeed, the largest cellulosic plant, Range Fuels, in Camilla, Ga., just went bankrupt. The loss to American taxpayers appears to be about $120 million, or about 25% of a Solyndra.

[. . .]

Having seen the ethanol debacle, will the states put solar and wind in their rightful (small) niches by repealing the RPSs? Increasing utility bills with renewable mandates is politically dangerous, and there is less and less political will to subsidize and otherwise prop up energy sources and technologies that cost too much.

Paul Wells on the shady characters behind “Ethical Oil”

Filed under: Cancon, China, Economics, Environment, Government — Tags: , , , — Nicholas @ 11:09

He pretty much blows the lid off this conspiracy to sell Canadian oil to unaware, easily duped foreigners who don’t realize how evil the conspirators are:

In hindsight, Stephen Harper’s new fight against the world’s oil sands detractors was a long time coming. Last November in Vancouver, the Prime Minister gave a local television interview in which he warned that “significant American interests” would be “trying to line up against the Northern Gateway project,” Enbridge’s proposed $3.5-billion double pipeline from near Edmonton to a new port at Kitimat, B.C.

“They’ll funnel money through environmental groups and others in order to try to slow it down,” Harper told his hosts. “But, as I say, we’ll make sure that the best interests of Canada are protected.”

In early November, U.S. President Barack Obama announced he was putting off final approval of TransCanada’s $7-billion Keystone XL pipeline until after this November’s presidential election. Harper has long viewed Obama as an unsteady ally. Now he’d had enough. “I’m sorry, the damage has been done,” he told CTV before Christmas. “And we’re going to make sure we diversify our energy exports.”

Calculating the real benefits of international trade

Filed under: Cancon, Economics — Tags: , , — Nicholas @ 10:12

Kevin Carmichael has an article in the Globe and Mail Economy Lab on the attempts to determine the actual benefits a country derives from international trade:

Currency traders love the monthly import and export data, which provide an excellent guide of how much demand exists for dollars, euros, yen, francs and the like.

But for anyone seeking a more precise understanding of the dynamics of international trade, the data compiled by customs agents are about as about as relevant to a modern economy as carbon paper.

The reason: supply chains. Virtually nothing is produced entirely within a single border anymore. Companies outsource everything from components to packaging. That means a good can cross a border several times on its way to becoming a final product. Each time, it’s value increases. That value is what the customs agent enters in his or her computer. But that inflates the actual contribution of that good to a country’s economy.

It is relatively early days, but some economists are trying to develop a more useful measure of international trade. Among them is the Conference Board of Canada, which Thursday released the first of three reports based on what it calls “value-added trade.” The report should be required reading in Ottawa. Its conclusions challenge much of what we think we know about the nature of Canada’s economy.

Julian Sanchez on SOPA/PIPA: “No matter how bad last season’s crops were, witch burnings are a poor policy response”

Filed under: Economics, Law, Liberty, Media, USA — Tags: , , , , — Nicholas @ 00:08

In a posting at the Cato@Liberty blog, Julian Sanchez discusses the claims of SOPA/PIPA supporters that new legislation is necessary to fight piracy:

Earlier this month, I detailed at some length why claims about the purported economic harms of piracy, offered by supporters of the Stop Online Piracy Act (SOPA) and PROTECT-IP Act (PIPA), ought to be treated with much more skepticism than they generally get from journalists and policymakers. My own view is that this ought to be rather secondary to the policy discussion: SOPA and PIPA would be ineffective mechanisms for addressing the problem, and a terrible idea for many other reasons, even if the numbers were exactly right. No matter how bad last season’s crops were, witch burnings are a poor policy response. Fortunately, legislators finally seem to be cottoning on to this: SOPA now appears to be on ice for the time being, and PIPA’s own sponsors are having second thoughts about mucking with the Internet’s Domain Name System.

That said, I remain a bit amazed that it’s become an indisputable premise in Washington that there’s an enormous piracy problem, that it’s having a devastating impact on U.S. content industries, and that some kind of aggressive new legislation is needed tout suite to stanch the bleeding. Despite the fact that the Government Accountability Office recently concluded that it is “difficult, if not impossible, to quantify the net effect of counterfeiting and piracy on the economy as a whole,” our legislative class has somehow determined that — among all the dire challenges now facing the United States — this is an urgent priority. Obviously, there’s quite a lot of copyrighted material circulating on the Internet without authorization, and other things equal, one would like to see less of it. But does the best available evidence show that this is inflicting such catastrophic economic harm — that it is depressing so much output, and destroying so many jobs — that Congress has no option but to Do Something immediately? Bearing the GAO’s warning in mind, the data we do have doesn’t remotely seem to justify the DEFCON One rhetoric that now appears to be obligatory on the Hill.

The International Intellectual Property Alliance — a kind of meta-trade association for all the content industries, and a zealous prophet of the piracy apocalypse, released a report back in November meant to establish that copyright industries are so economically valuable that they merit more vigorous government protection. But it actually paints a picture of industries that, far from being “killed” by piracy, are already weathering a harsh economic climate better than most, and have far outperformed the overall U.S. economy through the current recession. The “core copyright industries” have, unsurprisingly, shed some jobs over the past few years, but again, compared with the rest of the economy, employment seems to have held relatively stable at a time when you might expect cash-strapped consumers to be turning to piracy to save money.

January 19, 2012

In spite of the large number of petitioners, recalling Wisconsin’s governor may not be a done deal

Filed under: Economics, Government, Politics, USA — Tags: , , , , — Nicholas @ 12:33

Christian Schneider in City Journal on the efforts underway in Wisconsin to recall Governor Scott Walker:

One morning last February, Wisconsin governor Scott Walker called his staff into his office. “Guys,” he warned, “it’s going to be a tough week.” Walker had recently sent a letter to state employees proposing steps — ranging from restricting collective bargaining to requiring workers to start contributing to their own pension accounts — to eliminate the state’s $3.6 billion deficit. That day in February was when Walker would announce his plan publicly.

It turned out to be a tough year. The state immediately erupted into a national spectacle, with tens of thousands of citizens, led by Wisconsin’s public-employee unions, seizing control of the capitol for weeks to protest the reforms. By early March, the crowds grew as big as 100,000, police estimated. Protesters set up encampments in the statehouse, openly drinking and engaging in drug use beneath the marble dome. Democratic state senators fled Wisconsin to prevent a vote on Walker’s plan. Eventually, the Senate did manage to pass the reforms, which survived a legal challenge and became law in July.

The unions aren’t done yet: they’re now trying to recall Walker from office. To do so, they will try to convince Wisconsin voters that Walker’s reforms have rendered the state ungovernable. But the evidence, so far, contradicts that claim—and Wisconsinites seem to realize it.

The fight between the Governor and the public unions matters more than it may seem: Wisconsin was the first state to allow civil service workers to unionize and has traditionally been seen as a strong union (and therefore also Democratic) state ever since. If unions can have some of their power trimmed back there, it will hearten the efforts of other state governments to follow suit.

January 18, 2012

Stephen Harper “[C]ertain people in the United States would like to see Canada be one giant national park”

Filed under: Cancon, Economics, Environment, Politics — Tags: , , , , , — Nicholas @ 12:06

Investigative blogger Vivian Krause discusses American environmental groups’ interference in Canadian affairs in the Financial Post:

For five years, on my own nickel, I have been following the money and the science behind environmental campaigns and I’ve been doing what the Canada Revenue Agency hasn’t been doing: I’ve gathered information about the origin and the stated purpose of grants from U.S. foundations to green groups in Canada. My research is based on U.S. tax returns because the U.S. Internal Revenue Service requires greater disclosure from non-profits than does the CRA.

By my analysis and calculations, since 2000, U.S. foundations have granted at least US$300-million to various environmental organizations and campaigns in Canada, especially in B.C. The San Francisco-based Gordon and Betty Moore Foundation alone has granted US$92-million. Gordon Moore is one of the co-founders of Intel Corp. The William and Flora Hewlett Foundation and the David and Lucile Packard Foundation have granted a combined total of US$90-million, mostly to B.C. groups. These foundations were created by the founders of Hewlett-Packard Co.

[. . .]

The Great Bear Rainforest is a 21-million-hectare zone that extends from the northern tip of Vancouver Island to the southern tip of Alaska. Environmentalists now claim that oil tanker traffic must not be allowed in the Great Bear Rainforest in order to protect the kermode bear (aka the Great Spirit Bear). Whether this was the intention all along or not, the Great Bear Rainforest has become the Great Trade Barrier against oil exports to Asia.

Speaking on CBC last night, Prime Minister Stephen Harper said, “But just because certain people in the United States would like to see Canada be one giant national park for the northern half of North America, I don’t think that’s part of what our review process [for the Northern Gateway] is all about.”

January 15, 2012

As you’d expect, healthcare costs are not evenly distributed

Filed under: Economics, Health, USA — Tags: , , , — Nicholas @ 12:20

Jordan Weissmann in The Atlantic:

When it comes to America’s spiraling health care costs, the country’s problems begin with the 5%. In 2008 and 2009, 5% of Americans were responsible for nearly half of the country’s medical spending.

Of course, health care has its own 1% crisis. In 2009, the top 1% of patients accounted for 21.8% of expenditures.

The figures are from a new study by the Department of Health and Human Services, which examined how different U.S. demographics contributed to medical costs. It looked at the $1.26 trillion spent by civilian, non-institutionalized Americans each year on health care.

The top 5% of spenders paid an annual average of $35,829 in doctors’ bills. By comparison, the bottom half paid an average $232 and made up about 3% of total costs.

January 14, 2012

How much is your time worth?

Filed under: Britain, Economics, Railways, Randomness — Tags: , , , , — Nicholas @ 12:00

In an article about the recently approved high speed train link between London and Birmingham, Tim Harford points out a few oddities in the calculations that supposedly show how beneficial the new railway connection will be:

But it’s not just about forecasts — it’s about the value of time saved because of a faster journey, right?

That’s true. The high-speed link would save about 40 minutes on a journey from London to Birmingham. How much that is worth is an interesting question.

If you have a morning meeting it might mean an extra 40 minutes in bed.

It might indeed, which is priceless. HS2 Ltd told me that they use numbers from the Department for Transport. The DfT apparently values leisure time at about £6 an hour — this, intriguingly, implies that the UK government’s official position is that anyone under the age of 21 is wasting their time earning the young person’s minimum wage and would be wise to chillax in front of the Nintendo.

What about business travel?

Well, business travel is valued at £50 an hour. Unless the business travel in question is commuting, in which case it’s £7 an hour.

What?

Doesn’t make a bit of sense to me, either. Perhaps the idea is that commuting is eating into your leisure time, which is almost valueless apparently, whereas business travel is eating into your employer’s time, which is precious indeed. Complain to the DfT if you don’t like it.

January 13, 2012

Movie and music piracy: what’s the real economic cost?

Filed under: Economics, Law, Media — Tags: , , , , — Nicholas @ 09:00

On the Freakonomics blog, Kal Raustiala and Chris Sprigman look at the actual costs of piracy compared to the ludicrous claimed costs:

Supporters of stronger intellectual property enforcement — such as those behind the proposed new Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA) bills in Congress — argue that online piracy is a huge problem, one which costs the U.S. economy between $200 and $250 billion per year, and is responsible for the loss of 750,000 American jobs.

These numbers seem truly dire: a $250 billion per year loss would be almost $800 for every man, woman, and child in America. And 750,000 jobs — that’s twice the number of those employed in the entire motion picture industry in 2010.

The good news is that the numbers are wrong — as this post by the Cato Institute’s Julian Sanchez explains. In 2010, the Government Accountability Office released a report noting that these figures “cannot be substantiated or traced back to an underlying data source or methodology,” which is polite government-speak for “these figures were made up out of thin air.”

More recently, a smaller estimate — $58 billion — was produced by the Institute for Policy Innovation (IPI). But that IPI estimate, as both Sanchez and tech journalist Tim Lee have pointed out, is replete with methodological problems, including double- and triple-counting, that swell the estimate of piracy losses considerably.

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