Class is everywhere in this election, invoked seemingly every time someone wants to put a sympathetic face on a policy proposal or make a point about being in touch with ordinary Canadians.
There’s the “middle class” that’s constantly prioritized, flattered and fetishized by every campaign and candidate; critiques of people who come from such a privileged class they can’t possibly understand the concerns of normal people; sometimes bizarre pitches aimed at those who want a better future for their kids and just need a boost (camping, anyone?); and leaders who come from hardscrabble backgrounds — except that maybe they don’t quite.
But if class is an ever-present anthem running through campaign 2019, it’s a tune no one seems to know the proper words to, or they’re deliberately mumbling nonsense lyrics and assuming no one else will notice.
[…]
Then there is the electorally beloved — and conveniently poorly defined — “middle class”. Given all the campaign trail hot air devoted to lauding the values and hard work of this population and lionizing their noble struggles, you would think that at some point, other corners of the electorate would get ticked off about being ignored by politicians in favour of these golden children.
But they don’t, because pretty much everyone thinks that’s them.
Shannon Proudfoot, “The ‘family shame’ of Canadian politics: class struggle”, Maclean’s, 2019-10-04.
August 4, 2024
QotD: Canada’s “middle class”
July 30, 2024
The new and improved malaise for the 21st century
Back in the 1970s, US President Jimmy Carter identified the theme of the decade as “malaise”, and now, thanks to generations of feckless politicians, burgeoning bureaucratic empires, and economic stagnation, it’s back in an even malaisier form for the Current Year:
“Kamala Harris” by Gage Skidmore is licensed under CC BY-SA 2.0 
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Some time ago, I noticed that a general fatigue had taken a place alongside the malaise that was already being felt by many Americans and Canadians. The malaise stemmed from the overdue recognition that their lives were not going to get any better, and that they would have to work harder to just maintain a standard of living that they were already used to.
The fatigue came from a different, but not too distant place; the politicization of everything these past one and a half decades meant that there was no escape [from] the political. Whether sports, video gaming, or even fashion, everything had to be run by the cultural police before it could be deemed “not problematic”. The problem was (and still is) that everything to this type is “problematic”. This would not be a problem at all if this type were not empowered by the powers-that-be, but for some strange reason the cultural police quickly became ubiquitous, and their constant hectoring and lecturing ground most people down to the point where fatigue set in.
Everything became political, so therefore there was nothing that was not political. The fact that sanctions began to be placed against those who dared to buck the new trends in social mores meant that this was a totalizing form of politics. It wasn’t fascism, nor was it communism … but it was (and is) totalitarianism in a new form all its own. The rise of populism on the right in the West (as this trend is also present in Europe, but is not as thoroughly embedded there as it is in North America) is almost entirely a reaction to this. Freedom and liberty, as traditionally understood in the Anglosphere (i.e. “as long as I don’t harm others, I can do or say what I want”) took a back seat to what they call “equality”, a first step towards the more extreme demand known as “equity”.
Economic precariousness combined with the permanent presence of the Sword of Damocles above your head is a brilliant way to get people to shut up and get with the program. It is very coercive, but it is for the “greater good”, they tell us. What we already see is that it does not convince all, and that it has a negative effect on trust in governing institutions and national elites. The level of control by the managerial elite over the daily lives of its citizens is now at a micro-management one. Everyday, most people have to think carefully before speaking for fear of committing some aggression that could lead to the termination of their employment. They must mouth elite-approved social mores just in order to be able to tread water, as boat rocking is a secular sin. Why would the powers-that-be want to ever give up such a tool of mass control? The people are not to be trusted, which is why this totalizing system must remain in place. Just imagine if it were removed: the dreaded 1990s would return … or something.
Jacob Siegel has written an interesting essay on the concept known as “Whole of Society”, and how it has become a totalizing system:
To make sense of today’s form of American politics, it is necessary to understand a key term. It is not found in standard U.S. civics textbooks, but it is central to the new playbook of power: “whole of society“.
The term was popularized roughly a decade ago by the Obama administration, which liked that its bland, technocratic appearance could be used as cover to erect a mechanism for the government to control public life that can, at best, be called “Soviet-style”. Here’s the simplest definition: “Individuals, civil society and companies shape interactions in society, and their actions can harm or foster integrity in their communities. A whole-of-society approach asserts that as these actors interact with public officials and play a critical role in setting the public agenda and influencing public decisions, they also have a responsibility to promote public integrity.“
In other words, the government enacts policies and then “enlists” corporations, NGOs and even individual citizens to enforce them — creating a 360-degree police force made up of the companies you do business with, the civic organizations that you think make up your communal safety net, even your neighbors. What this looks like in practice is a small group of powerful people using public-private partnerships to silence the Constitution, censor ideas they don’t like, deny their opponents access to banking, credit, the internet, and other public accommodations in a process of continuous surveillance, constantly threatened cancellation, and social control.
The catch:
“The government” — meaning the elected officials visible to the American public who appear to enact the policies that are carried out across the whole of society — is not the ultimate boss. Joe Biden may be the president but, as is now clear, that doesn’t mean he’s in charge of the party.
Siegel writes that the “whole of society” approach arose during Obama’s shift away from the War on Terror to something called “CVE” (Countering Violent Extremism) i.e. the shift away from focusing on Islamist terror towards fighting America’s own citizens who are not with the new political, social, and cultural programs:
But the true lasting legacy of the CVE model was that it justified mass surveillance of the internet and social media platforms as a means to detect and de-radicalize potential extremists. Inherent in the very concept of the “violent extremist”, was a weaponized vagueness. A decade after 9/11, as Americans wearied of the war on terror, it became passé and politically suspicious to talk about jihadism or Islamic terrorism. Instead, the Obama national security establishment insisted that extremist violence was not the result of particular ideologies and therefore more prevalent in certain cultures than in others, but rather its own free-floating ideological contagion. Given these criticisms Obama could have tried to end the war on terror, but he chose not to. Instead, Obama’s nascent party state turned counterterrorism into a whole-of-society progressive cause by redirecting its instruments — most notably mass surveillance — against American citizens and the domestic extremists supposedly lurking in their midst.
A reflection on the 20-year anniversary of Sept. 11 written in 2021 by Nicholas Rasmussen, the former director of the U.S. National Counterterrorism Center, captures this view. “Particularly with the growing threat to public safety and security posed by domestic violent extremism, it is essential that we move beyond the post-9/11 counterterrorism strategy paradigm that placed the government at the center of most counterterrorism work.” Instead of expecting the government to deal with terrorist threats, Rasmussen advocated for “a much wider, more expansive and inclusive ‘whole-of-society’ approach” that he said should encompass “state and local governments, but also the private sector (to include technology companies), civil society in the form of both individual voices and non-governmental organizations (NGOs), and academia.”
July 26, 2024
QotD: Comparative advantage
David Ricardo, On the Principles of Political Economy and Taxation (1817), quoted on the Library of Economics and Liberty site.
July 25, 2024
David Friedman on the economics of trade
David Friedman discusses how, for example, the US and China manage their trading relationship:
“United States Balance of Trade Deficit-pie chart” by Shirishag75 is marked with CC0 1.0 
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I recently read a thread about US/China trade on a forum occupied mostly by intelligent people. As best I could tell, all participants were taking it for granted that things that make it more expensive to produce in the US, such as regulations or minimum wage laws, make the US “less competitive”, increase the trade deficit, give the Chinese an advantage. Reading Project 2025, the Heritage Foundation’s battle plan for a future conservative president, I observed the same pattern, with only one exception.
It did not seem to have occurred to any of the forum posters that US costs are in dollars, Chinese costs in Yuan, and what determines the exchange rate between them is the cost of producing things. Discussing trade policy in terms of absolute advantage, pre-Ricardian economics, isn’t quite as bad as discussing the space program on the assumption that the Earth is at the center of the universe with sun, moon and planets embedded in a set of nested crystalline spheres surrounding it — Copernicus was about three centuries earlier than Ricardo — but it is close. It is a point that I made here about a year ago, but since the question came up in my most recent post and in a thread on my favorite forum, it is probably worth making again.
The Economics of Trade
It is easiest to start with the simple case of two countries and no capital flows. The only reason Americans want to buy yuan with dollars is to buy Chinese goods, the only reason Chinese want to sell yuan for dollars is to buy American goods. If Americans try to buy more yuan than Chinese want to sell, the price of yuan in dollars goes up, if Chinese want to sell more yuan than Americans want to buy, the price goes down, just as in other markets. The price of yuan in dollars, the exchange rate, ends up at the price at which supply equals demand, which means that Americans are importing the same dollar (and yuan) value of goods that they are exporting.
Suppose the US government, inspired by the mercantilist view that countries get rich by exporting more than they import, tries to produce a “favorable” balance of trade by imposing a tariff on Chinese imports. Chinese goods are now more expensive to Americans. Since they want to buy less from China they don’t need as many yuan so the demand for yuan goes down, the price of yuan in dollars goes down, which reduces the cost of Chinese goods to Americans. Just as before, the exchange rate ends up at a level at which the dollar value of US exports equals the dollar value of US imports. Both imports and exports are now less, since trade is being taxed, but the balance of trade is exactly what it would be without the tariff.
Suppose the US becomes less good at making things due to an increase in government regulation or some other cause. Dollar prices of US goods in the US go up. That makes US goods more expensive to Chinese purchasers so they buy fewer of them, decreasing the demand for dollars on the dollar/yuan market. The exchange rate shifts — dollars are now less valuable so their price falls. Trade still balances. The US is not “less competitive”, merely poorer.
Now add in more countries. One reason Chinese want to buy dollars is to sell them to Germans who want dollars with which to buy American goods. We end up with a trade deficit with China, since some of the dollars they get for their exports are being used to import goods from Germany instead of the US, but a matching trade surplus with Germany, since they are using both the dollars they get by selling things to us and the dollars they get from China to buy goods from us. The same logic applies with more countries.
To explain how it is possible for the US to have a trade deficit we now drop the assumption of no capital movements. One reason Chinese want dollars is to buy goods and ship them to China but another is to buy assets in America — government bonds, shares of stock, real estate. Dollars bought and dollars sold are still equal but exports of goods no longer equal imports of goods. Part of what the US is “exporting”, selling to foreigners, is assets located in the US.
Suppose the US government wants to reduce the trade deficit. One way would be to reduce the budget deficit, since if the US is borrowing less it will not have to pay lenders as high an interest rate, which will make US bonds less attractive to Chinese buyers. Another way would be to block capital movements, make it illegal for foreign buyers to buy US assets. Doing that, however, means less capital investment in the US, hence higher interest rates. With fewer lenders to buy US bonds, the government will have to offer a higher interest rate to sell them.
One argument sometimes offered for restricting foreign investment is that if the Chinese own a lot of US assets that gives them power over us. The same argument was offered in the early 19th century when European investors were paying to build railroads and dig canals in the US. Daniel Webster pointed out that, if there was a conflict with European powers, their assets were sitting on our territory under our control. It wasn’t like they could repossess the Erie canal.
What about imposing a tariff in order to reduce imports? The logic of the previous argument still applies — the exchange rate will shift to make imports more attractive, exports less. Any effect on the deficit will depend on what happens to the attractiveness of US assets to Chinese investors. Figuring out the net effect is complicated, depending in part on what people expect trade policy and exchange rates to be when they collect on their capital investments.
QotD: Why devolution has not worked in the United Kingdom
I remember when arguments were originally made for devolution, commentators would claim that devolution would work in the same way that the federal structure of the US works, or, for that matter, how the cantonal system works in Switzerland. By which they meant that if a state such as Zug in Switzerland or Wisconsin in the US tried a specific policy (encouraging cryptos, or enacting Workfare, to take two actual examples), that the perceived success or failure of these policies would be studied by other cantons and states. Hence the idea that devolution allows a sort of “laboratory experiment” of policy to take place. It creates a virtuous kind of competition. That’s the theory.
What seems to have happened is that since devolution in the UK, Scotland, Wales and to some extent, Northern Ireland, have competed with England in who can be the most statist, authoritarian and in general, be the biggest set of fools. Whether it is 20 mph speed limits spreading to many places and harsh lockdowns (Wales) or minimum pricing on booze and “snitching” on your own family for views about gender (Scotland), the Celtic fringe appears to be more interested in being more oppressive, rather than less. I cannot think of a single issue in which the devolved governments of the UK have been more liberal, and more respectful, of liberty under the rule of law. (Feel free to suggest where I am mistaken.)
One possible problem is that because the UK’s overall government holds considerable budgetary power, the devolved bits of the UK don’t face the consequences of feckless policy to the extent necessary to improve behaviour.
Even so, I don’t entirely know why the Scots and Welsh have taken this turn and I resist the temptation to engage in armchair culture guessing about why they tend to be more collectivist at present. It was not always thus. Wales has been a bastion of a kind of liberalism, fused to a certain degree with non-conformity in religion, and Scotland had both the non-conformist thing, and the whole “enlightment” (Smith, Hume, Ferguson, etc) element. At some point, however, that appears to have stopped. Wales became a hotbed of socialism in the 20th century, in part due to the rise of organised labour in heavy industry, and then the whole folklore – much of it sentimental bullshit – about the great achievements in healthcare of Nye Bevan. Scotland had its version of this, plus the resentments about Mrs Thatcher and the decline of Scotland as a manufacturing power.
[…]
Maybe the “test lab” force of devolution will play a part in demonstrating that, as and when we get a Labour government for the whole of the UK, it will be a shitshow on a scale to put what has happened in the Celtic parts of the UK in the shade.
Johnathan Pearce, “Why has devolution not worked in a liberal direction?”, Samizdata, 2024-04-23.
July 23, 2024
Claim – “Everybody wants Gaza’s gas”
Tim Worstall explains why the popular idea that it’s demand for the natural gas reserves that sit under Palestine that is driving much of the situation in the Middle East is utter codswallop:
“Oil Platform in the Santa Barbara Channel, California” by Ken Lund is licensed under CC BY-SA 2.0 .
So we’ve a big thing about how all this fighting in Gaza is really about fossil fuels. @JamesMelville seems to think it’s true:
“Everybody wants Gaza’s gas.”
Oil and gas reserves – that’s the real proxy war in the Middle East.
This video provides a really succinct summary of the situation.
This “really succinct” summary includes the idea that the invasion of Iraq was all about access to that country’s oil. Which is very silly indeed. Before the war people paid Iraq for the oil. During the war people paid Iraq for the oil. After the war people are paying Iraq for the oil. The war hasn’t changed Iraq’s oil price — the global oil price has changed it, but not the war — and so the effect of the war upon access to Iraq’s oil has been, well, it’s been zero.
No, it’s not possible to then go off and say that Iraq wouldn’t sell to Americans and that’s why or anything like that. The US didn’t buy much Middle East oil anyway — mainly West African instead. But more than that, this is idiocy about how commodity markets work.
This is something we can test with a more recent example. So, there are sanctions on Russian oil these days over Ukraine. Western Europe, the US, doesn’t buy Russian oil. Russia is still exporting about what it used to. Because it’s a commodity, oil is.
What’s happening is that the Russian oil that used to come to Europe now goes to — say — India. And the Far East, or Middle East, whatever, oil that used to go to India now comes to Europe (the US is now a net exporter itself). Because that’s what happens with commodities. The very name, commodity, means they are substitutable. So, if one particular source cannot sell to one particular user then there’s a bit of a reshuffle. The same oil gets produced, the same oil gets consumed, it’s just the consumption has been moved around a bit and is now by different people. The net effect of sanctions on Russian oil has been, more or less, to increase the profits of those who run oil tankers. Ho Hum.
We’re also treated to the revelation that the US wants everyone to use liquefied natural gas because the US is the big exporter of LNG (well, it’s one). Therefore the US insists that Israel must develop the LNG fields off Gaza. Which is insane. If you’re an exporter you don’t want to start insisting on the start up of your own competition. The US demanding that the LNG not be produced at all would make logical sense but that’s not how conspirazoid ignorance works, is it? It has to be both a conspiracy and also a ludicrous one.
And a third claim. That this natural gas off Gaza is really worth $500 billion. That’s half a trillion dollars. We’ve looked at this value of gas off Gaza claim before and it’s tittery. $4 billion (that’s four billion, not five hundred billion) might be a reasonable claim and that’s just not enough to go to war over.
July 22, 2024
QotD: Post-apartheid South Africa
All of this brought tons of international condemnation onto the Zimbabwean regime, and a lot of countries looking for ways to pressure it to stop the atrocities. The glaring exception was Mbeki’s South Africa, which staunchly defended Zimbabwe for years as the killing and the starvation just kept ratcheting up. It’s unclear why they did this, beyond the ANC and ZANU-PF (the Zimbabwean ruling party) having a certain ideological and familial kinship, both being post-colonialist revolutionary parties that had overthrown white minority rule. But whatever the reason, this was the straw that finally caused Western politicians and celebrities to wake up a little bit and realize that South Africa was now ruled by thugs.
The second, even more catastrophic event that caused the South African government to lose the sheen of respectability was the AIDS epidemic and their response to it. The story of how Mbeki buried his head in the sand, embraced quack theories on the causes of AIDS, and condemned hundreds of thousands of people to avoidable deaths is well known at this point, but Johnson’s book is full of grimly hysterical details that turn the whole story into the darkest comedy you’ve ever seen.
For example: I had no idea that Mbeki was so ahead of his time in outsourcing his opinions to schizopoasters on the internet. According to his confidantes, at the height of the crisis the president was frequently staying up all night interacting pseudonymously with other cranks on conspiracy-minded forums (an important cautionary tale for all those … umm … friends of mine who enjoy dabbling in a conspiracy forum or two). These views were then laundered through a succession of bumbling and imbecilic health ministers such as Nkosazana Dlamini-Zuma or Mantombazana Tshabalala-Msimang who gave surreal press conferences extolling the healing powers of “Africanist” remedies such as potions made from garlic, beetroot, and potato.
Actually, the potions were a step up in some respects, the original recommendation from the South African government was that AIDS patients should consume “Virodene”, a toxic industrial solvent marketed by a husband-wife con-artist duo named Olga and Siegfried Visser. Later documents came to light revealing large and inexplicable money transfers between the Vissers and Tshabalala-Msiming. The Vissers then established a secret lab in Tanzania where they experimented on unsuspecting human subjects, engaged in bizarre sexual antics, and performed cryonics experiments on corpses. Despite this busy schedule, they also produced a constant stream of confidential memos on AIDS policy that were avidly consumed by Mbeki.
The horror of it all is that by this point there were very good drugs that could massively cut the risk of mother-child HIV transmission and somewhat reduced the odds of contracting the virus after a traumatic sexual encounter. There were a lot of traumatic sexual encounters. A contemporaneous survey found that around 60 percent of South Africans believed that forcing sex on somebody was not necessarily violence, and a common “Africanist” belief was that sex with a virgin could cure AIDS, all of which led to extreme levels of child rape. The government then did everything in its power to prevent the victims of these rapes from accessing drugs that could stave off a deadly disease. At first the excuse was that they were too expensive, then when the drug companies called that bluff and offered the drugs for free, it became that they caused “mutations”.
John Psmith, “REVIEW: South Africa’s Brave New World, by R.W. Johnson”, Mr. and Mrs. Psmith’s Bookshelf, 2023-03-20.
July 19, 2024
Argentina’s decades-long struggle with inflation
At the Foundation for Economic Education, Marcos Falcone provides an update on President Javier Milei’s ongoing efforts to drag the Argentine economy back from hyperinflation:
As Javier Milei rose to power in December of last year, Argentina suffered from an annual inflation rate of over 211 percent, only behind Venezuela and Lebanon. Having risen consistently for over two decades, a combination of perpetually unbalanced budgets and investors’ distrust made money creation (and thus inflation) almost unavoidable.
In that context, Javier Milei’s first promise in his inaugural address was to avoid hyperinflation. In order to do that, his highest priority was to balance the budget so as to stop monetizing the deficit. And indeed, after just one month, the government announced in January that Argentina achieved its first financial surplus in 16 years. In successive months, the budget has been kept balanced.
Quick action seems to be causing quick effects. Indeed, inflation has plunged from 25 percent in December to an expected 4 percent in July. This is happening in a context of price readjustments, with prices like rent going down (after the government repealed rent control laws) and energy and transport prices going up (as the government is cutting subsidies). Even the IMF has admitted that inflation is falling faster than expected. In fact, inflation is coming down so fast that banks have started offering mortgages for the first time in seven years. This signals that the market expects inflation to stay down.
Milei told Argentines that the process of defeating inflation would hurt—and it has. The downside of the government’s economic plan is that the country has entered a recession which is likely to last until at least the end of the year. Amid some layoffs, the country’s industrial output is decreasing. The spending cuts that allowed the country to balance the budget have resulted in less income for provinces and specific groups like retirees.
The rise of the reactionaries – Gen X poised to pounce and seize
Andrew Potter tries to explain why Gen X are much more likely to support conservative policies than the groovy fossil Boomers and the painfully Socialized Millennials and GenZ’ers:
Generation X Word Cloud Concept collage background
Best Motivation Blog: What Generation Is X
As North American politics continues its rightward lurch, it is becoming increasingly commonplace to note the outsized role of Gen Xers in pushing this trend. In 2022, a Politico essay tried to explain “How Gen X became the Trumpiest generation“. That same year, an essay in Salon lamented how “of course Gen X was always going to sell out and vote Republican”. Writing in The Line last year, Rahim Mohamed wondered “how Generation MTV became Generation GOP?” These aren’t outliers – there is a whole sub genre of cultural commentary devoted to trying to explain just why Gen Xers are so right wing, compared to both their Boomer predecessors and the Millennials and Zs who followed.
This raises a couple of questions, the first of which is: is it even true? And if so, why?
On the facts of the matter, it appears that members of Generation X are, on the whole, more conservative than other generations, and this is especially true in the United States. For the past three or four years, polls have consistently shown that Gen Xers are more likely to see the country as going in the wrong direction, more likely to disapprove of Joe Biden, and more likely to support Donald Trump and vote Republican, than any other generational cohort. And while every generation tends to become more conservative as it ages, it is a tendency that accelerated under Gen X.
Pollsters have found similar support for these trends in Canada. An Abacus survey conducted last August found Gen Xers had the highest level of support for the Conservatives, with 41 per cent of those surveyed intending to vote CPC. And just this past June, the pollster Frank Graves released a series of charts tracking sentiment in Canada on a number of issues, including national attachment, social cohesion, and voter intention. He found significant intergenerational discord, with members of Gen X showing the highest level of support for smaller government, and Gen X males having the highest level of support for the CPC.
So why is this the case? How did the generation that fought (and won) the first culture war against conservatives, that launched the antiglobalization movement, that made heroes out of left wing icons like Kurt Cobain and Naomi Klein, become the most right wing cohort of all? Did we follow our Boomer parents’ hippies-to-yuppies trajectory in selling out? Or is there something else at work, beyond crass financial self-interest?
There’s probably at least something to be said for the “crass self-interest” angle. Despite the long-standing claim to being the first generation to do worse than their parents, the truth is, Gen X is raking it in. Starting right around the pandemic, Canadian Gen Xers quietly overtook Boomers as the generation with the highest average household net worth. It may also explain why alone amongst the generations, members of Gen X list “cost of living” as their most salient political issue, in contrast with both the older and younger cohorts who identify things like climate change, health care, and the environment as the most important issues facing Canada.
July 16, 2024
Real world economic experiment to test Card & Krueger’s minimum wage theory
Tim Worstall points out that the California state government is — intentionally or not — running an interesting economic validation of the Card & Krueger study in New Jersey that seemed to show raising minimum wages didn’t have a negative impact on overall employment:
“Fast food” by Daniel Barcelona is licensed under CC BY 3.0 .
For think back to that New Jersey minimum wage study, Card and Krueger. That showed that acshully, employment in fast food joints rose when the minimum wage went up. Now, I’ve been saying for a long time now that I think there’s a fallacy of composition there.
“Fast food” isn’t “fast food”. There are — at least — two sectors here. There’re those big national chains, lots of advertising, franchisees, MaccyD’s and the like. Then there’s a vast hinterland of Mom and Pop places. The financial structures are entirely different. The chains are capital intensive. I think I’ve seen that buns for burgers come in pre-cut. Salad definitely arrives in bags, already shredded. There’s no prep – not even prep areas in those kitchens. Mom and Pop run differently. One reason I know is because I’ve owned and run one. There’s an awful lot of labour that goes into turning blocks of stuff into those sandwiches. Stuff is sliced, diced, soups are cooked on site, from identifiable ingredients, bread is sliced and on and on.
No, this isn’t to try and riff off The Bear. But there is a difference in economic structure between those who are large corporates vending fast food and not-large corporates vending fast food.
And I think — think, me, I do — that the problem with the Card and Krueger study was that it didn’t account for this. A change in the general labour rate might push people to the capital intensive end of this market. Certainly could do, it would be possible to model it that way. Which means that using only the data from the fast food chains, as C&K did, would pick up only part, perhaps half, of the reaction. The Mom and Pops shed labour, the capital intensive chains modestly pick it up, the net effect is — well, the net effect could be anywhere actually.
Which is what makes this CA minimum wage change so interesting. Because the $20 an hour applies only to those working for the big national chains — or their franchisees.
Mom and Pop have to pay the normal CA minimum wage, not the $20. So, the labour intensive part of the overall system has just been handed a competitive advantage against the capital intensive end of it. We would expect, could possibly measure, that the overall employment outcome is positive.
No, really. I’d be willing to defend the idea that it could be, certainly. Note that “could”. So, we’ve two sectors, capital intensive, labour intensive. We’ve just said that the capital using guys now have to pay more — much more — for their labour than the labour intensive guys. The capital intensive guys can only respond by higher prices or worse service (ie, fewer labour hours). The labour intensive sector might end up picking up so much of the traffic that they expand employment — expand employment so much as to actually increase overall fast food sector employment. By shifting from the capital to the labour intensive sectors.
This should be studied, right? Now, my actual economic skills — rather than ruminations — are zero so it’s not going to be me checking this out. But I recommend it as something for someone looking for a PhD subject to think about. Possibly even someone more senior than that looking for a point upon which to make their bones.
Does a higher minimum wage that only — only — applies to the capital intensive portion of an economic sector like fast food actually increase employment? By shifting the sector over to the more labour intensive sector not subject to that higher minimum wage?
Logically, it could, significant empirical work would be necessary to show it though.
Britain’s Tories – “It is hard to think of any political Party that has so relentlessly thrown away its political mandate”
Lorenzo Warby considers a few of the early lessons that can be drawn from the British general election results:
I dislike the term “the deep state”. It mystifies what is much more straightforward, even bland: how metastasising bureaucracy is undermining the resilience of Western societies and their political systems.
The British Labour Party has won a massive Parliamentary majority in the House of Commons even though its total votes fell: from 10,269,051 in 2019 — 32.1% of total votes — to 9,704,655 in 2024 — 33.7% of total votes. Labour’s massive Parliamentary majority is not a product of enthusiasm for Labour, but the fracturing of the votes of its opponents.
The Scottish National Party (SNP) vote fell dramatically — from 1,242,380 votes in 2019 to 724,758 in 2024. This was largely a casualty of the SNP embracing the genderwoo of Transactivism. Outside some narrow urban enclaves, no one votes for “woke” but, given a genuine opportunity, folk will vote against it. As Scots have.
The Liberal Democrats did very well, as they have a regionally concentrated vote — which, this time, they targeted properly — and disgruntled (posh) Shire Tories will protest vote Lib-Dem. Clearly, lots did.
The Tories did so badly because their already low vote was further reduced by the Reform vote surge. The Reform vote represented voters punishing the Tories for their failure to do anything they had promised. As political scientist Matt Goodwin puts it:
They failed to control our borders.
They failed to lower legal immigration.
They failed to cut taxes and the size of the state.
They failed to take on woke, exposing our children to ideas with no basis in science.
And they failed to level-up the left behind regions.
It is hard to think of any political Party that has so relentlessly thrown away its political mandate.
So, an angry, unhappy electorate (rightfully) punished two governing Parties (Tories and SNP) and has given Labour a massive majority, with little enthusiasm — almost two-thirds of voters voted for someone else — on a relatively low turnout.
There is, however, a deeper institutional issue underlying these results. Why are voters so disgruntled? Why did the Tories fail so spectacularly?
The answer to these questions is a mixture of how institutions have evolved, the development of media culture, the Anywhere-Somewhere divide and technocratic delusions.
Technocratic delusion
The technocratic delusion is multi-layered. It holds that governing is a managerial input-output problem, government bureaucracy simply implements policy, and that politics is not a motivation and coordination problem.
None of these presumptions are true, so technocratic politics fails. It does not connect to voters and does not understand, or grapple with, the actual institutional landscape.
The technocratic delusion is a way for clever people to be spectacularly clueless. Not the only such mechanism in the modern world.
July 13, 2024
QotD: The need for social status
It seems reasonable to think that the downtrodden might be most interested in obtaining status and money. But this is not the case. Inhabitants of prestigious institutions are even more interested than others in prestige and wealth. For many of them, that drive is how they reached their lofty positions in the first place. Fueling this interest, they’re surrounded by people just like them — their peers and competitors are also intelligent status-seekers. They persistently look for new ways to move upward and avoid moving downward. The French sociologist Émile Durkheim understood this when he wrote, “The more one has, the more one wants, since satisfactions received only stimulate instead of filling needs.” And indeed, a recent piece of research supports this: it is the upper class who are the most preoccupied with gaining wealth and status. In their paper, the researchers conclude, “relative to lower-class individuals, upper-class individuals have a greater desire for wealth and status … it is those who have more to start with (i.e., upper-class individuals) who also strive to acquire more wealth and status”. Plainly, high-status people desire status more than anyone else.
Furthermore, other research has found that absolute income does not have much effect on general life satisfaction. An increase in relative income, on the other hand, has a positive effect. Put differently, making more money isn’t important. What’s important is making more than others.
Rob Henderson, “Thorstein Veblen’s Theory of the Leisure Class — A Status Update”, Quillette, 2019-11-16.
July 10, 2024
QotD: Persuasion
Of course, like most people, I do assume that those people are wrong and I am right. (And in sober truth — can I confide in you as a friend? — I am right.)
Deirdre McCloskey, “The Rhetoric of Economics”, 1998.
Hat tip to Grant “I can take a hint” McCracken.
July 8, 2024
QotD: The Potlatch
The point, of course, is to show off how rich you are by showing off how much crystallized labor you are able to destroy. This pattern is not an uncommon one across human societies — a lot of human and animal sacrifice, while ostensibly religious in motivation, has this sort of showing off as an undertone. But what makes the potlatch especially interesting is its competitive nature. The Indians believe that as the goods are consumed by the blaze, every other wealthy man is “shamed” unless he comes back and burns objects of equal or greater value. It’s value destruction as a contest, like a dollar auction for status where the final price is set on fire rather than being paid to somebody, a negative-sum machine for destroying economic surplus.
Good thing our culture is way too civilized to do anything like that.
I don’t remember when it was that you told me I had to read this book about VIP “models and bottles” service at nightclubs, but I’m glad you did because it’s sort of like the Large Hadron Collider but for human social practices. By analyzing behavior under these extreme conditions, certain patterns that are normally obfuscated (often deliberately so) emerge with stark clarity. Much of your research focuses on “disreputable exchange” — the ways people buy and sell things while hiding the fact that they’re buying or selling something. Have you been able to get the NSF to pay for a night out in South Beach yet?
Gabriel: I should start off by disclosing that I’m friends with Ashley. However I don’t think that biases my opinion since the reason we are friends is that I admire her work.
Potlatch is one of the most interesting cultural practices in the world and the keystone upon which both economic anthropology and economic sociology are built. Indeed, you left out just how amazing it is in that not only did the native peoples of the Pacific Northwest destroy property in the form of salmon, blankets, and copper; but also wealth in the form of human beings, as they would use the occasion to both free and kill slaves. To us 21st century WEIRD Americans, murdering a slave and manumitting a slave seem like opposites, because manumission is humane and human sacrifice is brutal. But from the logic of status competition, they are alike in that both demonstrate that one is so wealthy that one can afford to give up the value of some of one’s slaves. Thus we see that not only the Tlingit but also the Romans would both murder and free slaves in funerary contexts.1 Patterson’s Slavery and Social Death has some very interesting material on this and is generally the greatest work of comparative scholarship on economic institutions since Max Weber — I hope to review it with you or Jane some day.
Now imagine it’s your job to describe one of the most interesting things to have ever happened, a ritual of passive-aggressively inviting rivals to parties that gavage your guests and culminate in wealth bonfires and human sacrifice, and the only thing you find worth emphasizing about it is how mean the Canadian government was to suppress the practice. This is how the Gene Autry Museum here in Los Angeles describes it, and you see similar emphasis at other museums that follow the curatorial heuristic of maximizing pious status redistribution and involvement of the descendants of the community being described, while avoiding at all costs anything that would serve as such a near occasion of awesome as to lead your internal monologue to roll tape for the Basil Poledouris score to Conan the Barbarian.
So now that we know what potlatch 1.0 is, why do I describe the models and bottles scene as a douchebag potlatch? There’s no human sacrifice, and the rivalry is a bit more friendly, but otherwise bottle service has a lot in common with a traditional potlatch. Most obviously, it is a ritual of competitive feasting where powerful men show off how much they can waste. The nightclubs are well aware of this and actively encourage “bottle wars”, where different tables compete to see how many bottles they can order. The service the club offers is not intoxication, but the spectacle of other clubgoers (and the home audience on Instagram) seeing how much the customer can spend. And so they don’t merely send a busboy or a waitress to quietly deliver the bottle, as would be the case at Applebee’s, but a bottle girl carrying bottles festooned in sparkler fireworks and, in one particularly decadent instance, the manager dressed as a gladiator and riding a chariot pulled by busboys. And once the bottles are drained, the bottles remain at the table. At a normal bar or restaurant, uncleared dishes would be a sign of lazy staff, but at a bottle service club the debris is an accumulating trophy that makes visible to all the consumer’s glorious expenditure.2
John Psmith and Gabriel Rossman, “GUEST JOINT REVIEW: Very Important People, by Ashley Mears”, Mr. and Mrs. Psmith’s Bookshelf, 2024-03-04.
1. Gladatorial ludi were originally funerary in nature. And we know from the Lex Fufia Caninia that by 2 BC funerary manumission was considered to be in such an escalatory spiral that it would ruin estates absent sumptuary laws limiting the practice.
2. Another example of garbage as testament to the host’s opulent generosity is the “unswept floor” mosaic motif common to many Hellenistic and Roman triclinia.
July 4, 2024
Argentina’s inflation rate
As you may have noticed, my interest in Argentinian affairs increased a lot with the election of Javier Milei as President. His first six months in office, while turbulent, do seem to have the economic indicators moving in the right direction for ordinary Argentines:
Argentina’s inflation rate has recently dropped to its lowest point since January 2022, registering a monthly increase of 4.2 percent in May according to the National Institute of Statistics and Census (INDEC). Although annual inflation has slowed for the first time since mid-2023, it still stands at 276.4 percent, one of the highest rates globally.
When Javier Milei assumed the presidency in December 2023, monthly inflation had skyrocketed to an unprecedented 25.5 percent. Within five months, Milei’s administration managed to reduce this figure by more than 20 percentage points. Despite the persistently high annual inflation rate, the trend indicates potential stabilization of the Argentine economy.
Javier Milei’s reforms have been described as aggressive. In his inaugural speech, he emphasized the need to clean up the economy before implementing his promises to dollarize and close the central bank.
To achieve a zero deficit, Milei enacted a 35 percent reduction in public spending. He achieved this by closing half of the ministries and secretariats, suspending public works for a year, reducing subsidies for energy and transportation, canceling government advertising, and maintaining the 2023 budget for 2024 despite an inflation rate of 300 percent. Essentially, the government drastically cut its expenditures.
These measures, although unpopular, yielded results. Milei’s government not only avoided a deficit, but achieved a surplus, and most importantly, inflation began to decline.
Following the inflation story in Argentina recently brought to mind Henry Hazlitt’s famous 1978 article “Inflation in One Page“. As the title suggests, Hazlitt summarizes the causes and remedies of inflation in a brief and simple explanation. He argued that inflation is a consequence of government monetary policies, specifically excessive money printing due to unbalanced budgets caused by extravagant government spending.
