Quotulatiousness

April 18, 2011

Malinvestment the next big problem for China?

Filed under: China, Economics, Government — Tags: , , — Nicholas @ 09:54

Nouriel Roubini thinks that the Chinese central planners are missing the clues about overinvestment in their infrastructure binge:

China’s economy is overheating now, but, over time, its current overinvestment will prove deflationary both domestically and globally. Once increasing fixed investment becomes impossible — most likely after 2013 — China is poised for a sharp slowdown. Instead of focusing on securing a soft landing today, Chinese policymakers should be worrying about the brick wall that economic growth may hit in the second half of the quinquennium.

Despite the rhetoric of the new Five-Year Plan — which, like the previous one, aims to increase the share of consumption in GDP — the path of least resistance is the status quo. The new plan’s details reveal continued reliance on investment, including public housing, to support growth, rather than faster currency appreciation, substantial fiscal transfers to households, taxation and/or privatization of state-owned enterprises (SOEs), liberalization of the household registration (hukou) system, or an easing of financial repression.

China has grown for the last few decades on the back of export-led industrialization and a weak currency, which have resulted in high corporate and household savings rates and reliance on net exports and fixed investment (infrastructure, real estate, and industrial capacity for import-competing and export sectors). When net exports collapsed in 2008-09 from 11 percent of GDP to 5 percent, China’s leader reacted by further increasing the fixed-investment share of GDP from 42 percent to 47 percent.

Thus, China did not suffer a severe recession — as occurred in Japan, Germany, and elsewhere in emerging Asia in 2009 — only because fixed investment exploded. And the fixed-investment share of GDP has increased further in 2010-2011, to almost 50 percent.

The problem, of course, is that no country can be productive enough to reinvest 50 percent of GDP in new capital stock without eventually facing immense overcapacity and a staggering nonperforming loan problem. China is rife with overinvestment in physical capital, infrastructure, and property. To a visitor, this is evident in sleek but empty airports and bullet trains (which will reduce the need for the 45 planned airports), highways to nowhere, thousands of colossal new central and provincial government buildings, ghost towns, and brand-new aluminum smelters kept closed to prevent global prices from plunging.

H/T to Publius for the link.

The Magic Washing Machine, by Hans Rosling

Filed under: Economics, Environment, Health, Technology — Tags: , , , — Nicholas @ 09:49

H/T to Jon for the link.

April 17, 2011

China’s real estate bubble

Filed under: China, Economics, Government — Tags: , , , — Nicholas @ 09:24

This is why the Finnish election matters to Portugal

Filed under: Economics, Europe, Politics — Tags: , , , — Nicholas @ 09:00

Unlike most other EU states, Finland has an option of putting the bailout to a vote:

Opinion polls suggest the True Finns have nearly quadrupled in popularity since the last election though they are unlikely to enter government.

Analysts see mainstream parties taking a harder line on the EU as a result.

Unlike other eurozone states, Finland can put requests for bail-out funds to a majority vote in parliament.

Since any bail-out must be approved unanimously by all 17 eurozone members, a hostile Finnish government could theoretically veto it.

The outcome of Sunday’s election may affect EU plans to shore up Portugal as well as impacting on stability in debt markets.

April 13, 2011

“Using the principle of ‘demonstrated preference,’ this music video ranks as the most popular in human history”

Filed under: Economics, Education, Liberty, Media — Tags: , , — Nicholas @ 10:22

Jon sent me this article by Jeffrey Tucker which re-interprets Rebecca Black’s “Friday” as a libertarian allegory:

Far more significant is the underlying celebration of liberation that the day Friday represents. The kids featured in the video are of junior-high age, a time when adulthood is beginning to dawn and, with it, the realization of the captive state that the public school represents.

From the time that children are first institutionalized in these tax-funded cement structures, they are told the rules. Show up, obey the rules, accept the grades you are given, and never even think of escaping until you hear the bell. If you do escape, even peacefully of your own choice, you will be declared “truant,” which is the intentional and unauthorized absence from compulsory school.

This prison-like environment runs from Monday through Friday, from 8 a.m. to late afternoon, for at least ten years of every child’s life. It’s been called the “twelve-year sentence” for good reason. At some point, every kid in public school gains consciousness of the strange reality. You can acquiesce as the civic order demands, or you can protest and be declared a bum and a loser by society.

“Friday” beautifully illustrates the sheer banality of a life spent in this prison-like system, and the prospect of liberation that the weekend means. Partying, in this case, is just another word for freedom from state authority.

The largest segment of the video then deals with what this window of liberty, the weekend, means in the life of someone otherwise ensnared in a thicket of statism. Keep in mind here that the celebration of Friday in this context means more than it would for a worker in a factory, for example: for the worker is free to come and go, to apply for a job or quit, to negotiate terms of a contract, or whatever. All of this is denied to the kid in public school.

Delaying retirement: expect to see lots of articles like this

Filed under: Britain, Economics — Tags: , , , — Nicholas @ 07:57

This Guardian article is a pattern for lots to follow in the next few years, as would-be retirees discover that they can’t afford to retire when they’d hoped:

Two-fifths of people who intended to retire this year will have to work for an extra six years because they cannot afford to stop working, according to a study by Prudential.

The pension provider’s Class of 2011 report found that 38% of people are delaying their retirement, and 40% of those say they will have to work until they are 70 to have a comfortable income.

It also shows that 22% of those delaying retirement are doing so because they can’t afford to stop working, up from 15% last year. They had intended, on average, to retire at 62, but now believe they will be at least 68 before they can draw a pension.

Governments in the western world are slowly moving the mandatory retirement age (where it exists), but even in some unionized environments, the benefits workers depend on start to phase out before retirement age. The expectation is that government programs would be there to cover older workers, but governments have little chance of expanding programs during tough economic times.

April 12, 2011

A “gun-crazed oil-drunk Albertan” on the NDP and Green platforms

Filed under: Bureaucracy, Cancon, Economics, Liberty, Politics — Tags: , , , , , — Nicholas @ 12:00

Colby Cosh tries to be nice about the Green Party and NDP platforms:

The contrast between the parties’ platforms is interesting: the Green ideas induce slightly more sheer nausea of the “literally everything in here is eye-slashingly horrible” kind, but at the same time there is a consoling breath of radicalism pervading Vision Green, a redeeming Small Is Beautiful spirit. At least, one feels, their nonsense is addressed to the individual. A typical laissez-faire economist would probably like the Green platform the least of the four on offer from national parties, but the Greens may be the strongest of all in advocating the core precept that prices are signals. At one point, denouncing market distortions created by corporate welfare, Vision Green approvingly quotes the maxim “Governments are not adept at picking winners, but losers are adept at picking governments.” (The saying is attributed to a 2006 book by Mark Milke of the Fraser Institute, but a gentleman named Paul Martin Jr. had uttered a version of it as early as 2000.)

That has always been the biggest failing of the regulatory view of politics: no matter how carefully you select the regulators, the regulated have many, many ways to (eventually) suborn them. Regulatory capture is the most common result, as the regulators become more closely attuned to the needs of their “charges” and work to protect them from competitors and social and technological change. What may have started as an attempt to rein-in over powerful industrial interests slowly becomes a de facto arm of government protection over the existing major players in that industry.

The New Democratic platform is more adult and serious than the Greens’ overall, which comes as no surprise. But it occurs to me, not for the first time this year, how much some folks love “trickle-down politics” when they are not busy denouncing “trickle-down economics”. How does Jack Layton hope to remedy the plight of the Canadian Indian? By “building a new relationship” with his politicians and band chiefs. How does he propose to improve the lot of artists? By flooding movie and TV producers, and funding agencies, with money and tax credits. He’ll help parents by giving money to day care entrepreneurs; he’ll sweeten the pot for “women’s groups” and “civil society groups”. One detects, perhaps mostly from prejudice, a suffocating sense of system-building, of unskeptical passion for bureaucracy, of disrespect for the sheer power of middlemen to make value disappear.

It’s useful to check who would be the actual beneficiaries of this kind of increased bureaucratization of life — and we’re generally not talking about the putative winners, but the actual ones — the ones who will staff the new agencies, bureaux, and commissions, the ones who will provide consulting services, and the ones who will study the results.

The Greens get a big thumbs-up from this corner for this particular clause of their platfom:

In 2008, according to the Treasury Board, Canada spent $61.3 million targeting illicit drugs, with a majority of that money going to law enforcement. Most of that was for the “war” against cannabis (marijuana). Marijuana prohibition is also prohibitively costly in other ways, including criminalizing youth and fostering organized crime. Cannabis prohibition, which has gone on for decades, has utterly failed and has not led to reduced drug use in Canada.

The Greens promise that cannabis would be removed from the schedule of illegal drugs and that the growth and sale of cannabis products would be regularized (and taxed), although with the usual shibboleth about the market needing to be restricted to small producers. If you’re making the stuff legal to sell, you shouldn’t try to micro-manage the product and producers you’re moving into the legal marketplace.

April 11, 2011

Budget was over-optimistic, but promises based on that budget are fantasies

Filed under: Cancon, Economics, Politics — Tags: , , — Nicholas @ 10:36

Over at the consistently interesting Economy Lab blog at the Globe and Mail, Stephen Gordon casts scorn equally on Liberal, Conservative, and NDP campaign promises:

All parties are using the March 22 budget as a baseline for their scenarios; their platforms enumerate tax and spending plans in terms of deviations from the budget scenario. So the first problem to point out is that the budget’s scenario of freezing nominal expenditures for five years without cutting services or programs is at best implausibly optimistic.

The Liberal platform [. . .] builds on that implausible baseline by overestimating anticipated revenues from an increase in the corporate income tax (CIT) by a factor of 2.5.

The Conservative platform’s variation on its own budget is a promise to identify and implement savings worth $4-billion a year within the next three years without cutting programs or reducing services. No other explanation is offered, but then again, neither do they seem to be able to explain the cuts that were announced in the budget.

But the prize for budgetary opacity must surely go to the New Democrats’ “costing document”. Firstly, their estimate of $9-billion a year from increasing the CIT rate is even more implausible than that of the Liberals: an overestimate by a factor of at least three. The next largest source of revenue — “Tax Haven Crackdown” — is supposed to produce more than $3-billion in 2014-15. I cannot offer you any more in the way of explanation behind that number, because the NDP platform is completely silent on the matter. No measures are announced, no reasoning is offered to explain why those measures might be sensible, and no research is offered to justify the $3-billion estimate. The same goes for the “Ending Fossil Fuel Subsidies” entry: $2-billion a year in extra revenues, again with no explanation, discussion or research.

Wormme mashes up Theodore Sturgeon and Frederick Winslow Taylor

Filed under: Bureaucracy, Economics, Education, Government, Media — Tags: , — Nicholas @ 09:46

wormme read an older Atlantic article linked from Instapundit and had this to say:

Via Insty, this is one of the best things I’ve ever read. It eviscerates the myth of management competence the way that Joe Biden destroys the idea of government competence. But let’s take a step back from the specifics of business management. Look at all the other occupations that share management’s main trait.

Because in reality they’re all the same thing.

Here’s some fields in which competence is assumed, all evidence to the contrary: government, law, management, education, economics, scholarship, and all journalistic media.

Notice what they all have in common? As a primary feature?

Jaw flappin’, tongue waggin’, hot air spewin’ talkety talk talk words blah blah blah.

“Them that can, do. Them that can’t, teach.” And manage and report and govern. But you don’t hear that adage anymore, do you? The Talkers have brainwashed people into thinking they’re Doers as well.

I expect this is the thing that actually brings down Western Civilization. The Doers letting the Talkers take over the Doings.

The chin-waggin’ industries want “ex cathedra” status for their every mumble. How do they repay? By finding nothing but fault in the Doers: industries, energy production, “big box” stores, etc., all the way down to the evil of the Happy Meal.

This still wouldn’t have spelled civilization’s doom, had the Talkies remained apart. Journalism in particular is supposed to report on lies and wrongdoing. And they do so with gusto, when investigating Doers. Do you ever see them going after fellow Talkers like that? They’re in cahoots. Total…cahoots.

April 8, 2011

Monty’s daily dose of DOOM!

Filed under: Economics, Europe — Tags: , , , — Nicholas @ 11:12

People suffering from over-cheerful attitudes about the future of the European Union could just read Monty’s chock-full-of-DOOM postings at Ace of Spades HQ for a quick depressant:

Let’s begin abroad by explaining why Spain is boned. Spain suffers from the same disease as the rest of the continent generally — socialism, postmodernism, an ossified job market, an unsustainable welfare state — but in more concentrated form. Spain is so boned that their main export these days is young ‘uns (h/t Andy).

If you look at the countries currently in the midst of insolvency in Europe — Ireland, Greece, Portugal, and (shortly) Spain — it’s obvious that they are different entities altogether from their more prosperous European peers. For one, most of them are recent entrants onto the first-world stage. Spain languished under Franco until the mid 1970’s; Ireland only emerged from decades of civil strife (both amongst themselves and against England) in the early 1990’s; and Portugal was (and still is) a third-world nation glued to the continenet almost as an afterthought. Portugal is more properly thought of as a North African developing country than a first-world European country, whatever the maps say (h/t rdbrewer).

The Euro project hid those problems…for a while. Cheap credit allowed the dysfunctional European countries to borrow enough money to pretend to a first-world standard of living for more than a decade. There was real growth in the various economies — particularly in Ireland — but much of the “growth” was mainly borrowed money with little attendant economic or social reform.

The Great Downturn of 2008 did not cause the problem; it simply exposed what a sham the whole thing had been all along.

England is watching the drama play out on the Continent, and thanking $DEITY that they never signed on to the Euro. England still has serious problems, but they also have options that the other European nations do not have because they control their own currency.

As usual, the original post has lots of links to follow to increase the dosage of DOOM. Adjust intake to adequately suppress your optimism.

British study finds wind power even less economical than hoped

Filed under: Britain, Economics, Technology — Tags: , — Nicholas @ 09:56

The assumption was that wind farms would produce 30% of their theoretical maximum over time (the wind doesn’t blow all the time, so no wind farm will ever produce 100% for more than a short period of time). This number now appears to be too optimistic:

A new analysis of wind energy supplied to the UK National Grid in recent years has shown that wind farms produce significantly less electricity than had been thought, and that they cause more problems for the Grid than had been believed.

The report [. . .] was commissioned by conservation charity the John Muir Trust and carried out by consulting engineer Stuart Young. It measured electricity actually metered as being delivered to the National Grid.

[. . .]

In general, then, one should assume that a wind farm will generate no more than 25 per cent of maximum capacity over time (and indeed this seems set to get worse as new super-large turbines come into service). Even over a year this will be up or down by a few per cent, making planning more difficult.

It gets worse, too, as wind power frequently drops to almost nothing. It tends to do this quite often just when demand is at its early-evening peak:

At each of the four highest peak demands of 2010 wind output was low being respectively 4.72%, 5.51%, 2.59% and 2.51% of capacity at peak demand.

And unfortunately the average capacity over time is pulled up significantly by brief windy periods. Wind output is actually below 20 per cent of maximum most of the time; it is below 10 per cent fully one-third of the time. Wind power needs a lot of thermal backup running most of the time to keep the lights on, but it also needs that backup to go away rapidly whenever the wind blows hard, or it won’t deliver even 25 per cent of capacity.

The economics of Falcon Heavy

Filed under: Economics, Space — Tags: , , — Nicholas @ 09:44

Charles Stross runs the numbers on the new SpaceX Falcon Heavy:

SpaceX announce Falcon Heavy. It’s been expected for some time — it’s been on their road map for a few years — but it’s worth repeating: man-rated and with a payload of 53 tons to Low Earth Orbit, Falcon Heavy has the largest payload of any space launcher since Energiya and the Saturn V, and it’s dirty-cheap by EELV standards at $80M-120M per launch. Moreover, it can’t easily be dismissed as vapourware because it’s an evolutionary development of a real, flying launch vehicle (Falcon 9) — a Falcon 9 core with two extra first stages strapped to the sides as boosters (and some fancy cross-stage plumbing to run the central core motors off fuel bled from the strap-ons, so that at BECO the central stage still carries a full fuel load). With the giant Iridium NEXT contract SpaceX have landed (the largest commercial launch contract in history), not to mention the ISS resupply contract, SpaceX looks likely to have the cash flow to build and fly this thing.

[. . .]

Note that these days the budget for a big Hollywood blockbuster — Avatar, for instance — can push over the $0.3Bn mark. It’s hard to say what the media rights to the second! ever! manned Moon program! would be, but it’s hard to see them going for much less than a major blockbuster movie. I think it unlikely that the expedition could be run entirely on the media rights, but they should certainly make a double-digit percentage contribution to the budget. Add the opportunity to tout for the science budget of some major agencies (by carrying lunar orbiter packages as payload, perhaps?) and it might be possible to raise $250-500M towards the costs of a $600-1000M expedition.

Is Elon Musk planning on being the 13th man on the moon?

More on Falcon Heavy at The Register.

April 7, 2011

Friend of Randian cultists afraid to say what he really means

Filed under: Economics, Humour, Liberty, Media — Tags: , , , — Nicholas @ 09:13

The victim of Objectivist intimidation is poor little P.J. O’Rourke, who has to be very careful how he reviews Atlas Shrugged:

Atlas shrugged. And so did I.

The movie version of Ayn Rand’s novel treats its source material with such formal, reverent ceremoniousness that the uninitiated will feel they’ve wandered without a guide into the midst of the elaborate and interminable rituals of some obscure exotic tribe.

Meanwhile, members of that tribe of “Atlas Shrugged” fans will be wondering why director Paul Johansson doesn’t knock it off with the incantations, sacraments and recitations of liturgy and cut to the human sacrifice.

But that’s about as far as he dares to go, risking retribution from Randian cultists. Oh, wait . . . he does go a tiny bit further towards martyrdom after all:

But I will not pan “Atlas Shrugged.” I don’t have the guts. If you associate with Randians — and I do — saying anything critical about Ayn Rand is almost as scary as saying anything critical to Ayn Rand. What’s more, given how protective Randians are of Rand, I’m not sure she’s dead.

The woman is a force. But, let us not forget, she’s a force for good. Millions of people have read “Atlas Shruggged” and been brought around to common sense, never mind that the author and her characters don’t exhibit much of it. Ayn Rand, perhaps better than anyone in the 20th century, understood that the individual self-seeking we call an evil actually stands in noble contrast to the real evil of self-seeking collectives. (A rather Randian sentence.) It’s easy to make fun of Rand for being a simplistic philosopher, bombastic writer and — I’m just saying — crazy old bat. But the 20th century was no joke. A hundred years, from Bolsheviks to Al Qaeda, were spent proving Ayn Rand right.

April 6, 2011

India’s educational triumphs and hidden flaws

Filed under: Economics, Education, India — Tags: , — Nicholas @ 11:00

India has vastly increased the numbers of students who go on to post-secondary education, and strives to keep tuition low and entry open to as many prospective students as possible. This great success in enrollment hides some pretty nasty deficiencies in the actual quality of education being offered:

Call-center company 24/7 Customer Pvt. Ltd. is desperate to find new recruits who can answer questions by phone and email. It wants to hire 3,000 people this year. Yet in this country of 1.2 billion people, that is beginning to look like an impossible goal.

So few of the high school and college graduates who come through the door can communicate effectively in English, and so many lack a grasp of educational basics such as reading comprehension, that the company can hire just three out of every 100 applicants.

[. . .]

Business executives say schools are hampered by overbearing bureaucracy and a focus on rote learning rather than critical thinking and comprehension. Government keeps tuition low, which makes schools accessible to more students, but also keeps teacher salaries and budgets low. What’s more, say educators and business leaders, the curriculum in most places is outdated and disconnected from the real world.

[. . .]

Muddying the picture is that on the surface, India appears to have met the demand for more educated workers with a quantum leap in graduates. Engineering colleges in India now have seats for 1.5 million students, nearly four times the 390,000 available in 2000, according to the National Association of Software and Services Companies, a trade group.

But 75% of technical graduates and more than 85% of general graduates are unemployable by India’s high-growth global industries, including information technology and call centers, according to results from assessment tests administered by the group.

There’s no easy solution to this problem: by lowering educational standards, you reduce the employability of your existing graduates. If you raise standards, you increase the cost of education, both to students and to the government. Privatization may be the answer, but it won’t come cheap, and therefore will be politically dangerous to implement.

April 5, 2011

Grameen bank founder loses final appeal

Filed under: Asia, Economics, Law, Liberty — Tags: , , — Nicholas @ 09:09

The founder of the revolutionary micro-capital Grameen Bank has been removed from position of managing director:

Nobel laureate Muhammad Yunus has lost his final appeal in Bangladesh’s Supreme Court against his sacking from the Grameen micro-finance bank he founded.

The court upheld the decision by the central bank to remove him from office.

The bank said Professor Yunus had been improperly appointed while past retirement age.

But Professor Yunus said the attempt to remove him from the bank had been politically motivated.

The Grameen Bank has pioneered micro-lending to the poor by giving small loans to millions of borrowers.

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