Quotulatiousness

May 4, 2024

Process optimization can definitely be taken too far

Filed under: Business, Economics, Food, Technology — Tags: , , , , , , — Nicholas @ 04:00

Freddie deBoer considers systems that have been overoptimized to the detriment of most users and the benefit of a small, privileged minority:

I know a guy who used to make his living as an eBay reseller. That is, he’d find something on eBay that he thought was underpriced so long as the auction didn’t go above X dollars, buy it, then resell it for more than he paid for it Classic imports-exports, really, a digital junk shop. Eventually he got to the point where, with some items, he didn’t ever have physical possession of them; he had figured out a way to get them directly from whoever he bought an item from to the person he had sold the item to, while still collecting his bit of arbitrage along the way. This buying and selling of items on eBay, looking for deals, was sufficient to be his full-time job and pay for a mortgage. But the last time I saw him, a few years ago, he had gotten an ordinary office job. He told me that it had become too difficult to find value; potential sellers and buyers alike had access to too many tools that could reveal the “real” price of an item, and there was little delta to eke out. He’s not alone. If you search around in eBay-related forums, you’ll find that many longtime sellers have reached similar conclusions. The hustle just doesn’t work anymore.

I don’t suppose there’s any great crime there — it’s all within the rules. And there does appear to still be an eBay-adjacent reselling economy; it’s just that, as far as I can glean, it’s driven by algorithms and bots that average resellers simply don’t have access to. It appears that some super-resellers have implemented software solutions to identify underpriced goods and buy them automatically and algorithmically. They have optimized the system for their own use, giving them an advantage, putting other sellers at a disadvantage, and arguably hurting buyers by eliminating uncertainty that sometimes results in lower-than-optimal-to-sellers prices. This is all in sharp contrast to the early years, when my friend would keep listings for lucrative product categories open – in separate windows, not tabs, that’s how long ago this was – and refresh until he found potential moneymakers. That sort of human searching and bidding work stands at a sharp disadvantage compared to those with information-scraping capacity and automated tools. It’s a good example of how access to data has left systems overoptimized for some users. One of the things that the internet is really good at is price discovery, and these digital tools help determine the “optimal” price of items on eBay, which results in less opportunity for arbitrage for other players.

My current working definition of overoptimization goes like this: overoptimization has occurred when the introduction of immense amounts of information into a human system produces conditions that allow for some players within that system to maximize their comparative advantage, without overtly breaking the rules, in a way that (intentional or not) creates meaningful negative social consequences. I want to argue that many human systems in the 2020s have become overoptimized in this way, and that the social ramifications are often bad.

Getting a restaurant reservation is a good example. Once upon a time, you called a restaurant’s phone number and asked about a specific time and they looked in the book and told you if you could have that slot or not. There was plenty of insiderism and petty corruption involved, but because the system provided incomplete information that was time consuming to procure, there was a limit to how much you could game that system. Now that reservations are made online, you can look and see not only if a specific slot has availability but if any slots have availability. You can also make highly-educated guesses about what different slots are worth on the market through both common sense (weekend evenings are the most valuable etc) and through seeing which reservations get snapped up the fastest in an average week. And being online means that the reservation system is immediate and automatic, so you can train a bot to grab as many reservations as you want, near-instantaneously, and you can do so in a way that the system doesn’t notice. (Unlike, say, if you called the same restaurant over and over again and tried to hide your voice by doing a series of fake accents.) The outcome of all this is that getting a reservation at desirable places is a nightmare and results in a secondary market that, like seemingly everything in American life, is reserved for the rich. The internet has overoptimized getting a restaurant reservation and the result is to make it more aggravating and less egalitarian.

As has been much discussed, nearly the exact same scenario has made getting concert tickets a tedious and ludicrously-pricy exercise in frustration.

April 29, 2024

“The Earth goes around the Sun, or so they would have you believe …”

Filed under: Economics, Environment, History — Tags: , , , , — Nicholas @ 03:00

Colby Cosh on a recent “grand theory” from Andrea Matranga, an Italian economist who outlined his thoughts in a paper accepted by the Quarterly Journal of Economics, summarized in the sub-hed “Hunter-gatherers were better off than Neolithic farmers, diet-wise — until Earth was hit by seasonal extremes caused by Jupiter’s gravity”:

Reconstruction of a neolithic farmstead at the Irish National Heritage Park in Ferrycarrig.
Photo by Jo Turner via Wikimedia Commons.

Matranga’s own explanation for the invention of agriculture is: “Believe it or not, it is down to extraterrestrial forces”. Yes, that’s an actual quote from a cheeky Twitter thread in which Matranga summarizes his hypothesis colourfully. The real idea is that the period of the Neolithic Revolutions coincided with a time when seasonal temperature and rainfall differences were maximized by coinciding features of Earth’s orbit — features attributable mostly to Jupiter’s gravitational tug on us.

The Earth goes around the Sun, or so they would have you believe, and Earth’s rotational axis is tilted relative to the Sun, which creates the seasons. But the Earth’s motion has other subtle wobbles and shimmies caused by Jupiter: the eccentricity of its elliptical orbit grows and shrinks, and the rotational axis “precesses”, or wobbles, meaning that the face of the Earth pointing toward the Sun at our closest approach to it changes over time.

The implication of this is that over a period of millennia, and particularly in what we think of as the “temperate” zones, the magnitude of climate seasonality will itself change in a somewhat chaotic way. For some periods much longer than a human lifetime, seasonal changes might be almost beneath notice; a few millennia later, they become a dominant feature of human experience. And one hemisphere of the planet — say, the northern one — might end up with a lingering developmental advantage because it was favoured at the right moment by the precession of Earth’s axis.

Matranga pulls together a lot of math, astronomy and geography to show that the local Neolithic Revolutions coincide with maximum local seasonality, and then he builds some economic models of primitive society to suggest what effect this might have had on social organization and population evolution. Alfred Marshall would have told him to burn this part of his paper, but perhaps the equations are necessary for appearances. The crucial point is that Matranga has found a strong possible explanation for the Neolithic paradox — why, and when, humans in many places adopted a form of social organization that seems to have left most of them worse off on average.

For it’s not just the average that matters. In a world that was more or less the same year-round, hunter-gatherers didn’t have to worry about food storage: they could migrate cyclically within a small range, following wild game, to keep up with modest seasonal effects. But if the seasons then got more intense, food storage would become more important to the long-term survival of the group: one winter could now finish everyone off.

April 28, 2024

How Britain got out of the Great Depression (and no, it wasn’t WW2)

Filed under: Britain, Economics, Government, History — Tags: , , , , — Nicholas @ 03:00

Tim Worstall, in refuting something being pushed by Willie Hutton, explains how the British government escaped from the Great Depression and set off a nice little boom in the mid- to late-1930s:

Piccadilly Circus in London, mid-1930s.
Colourized photo via Reddit.

Well, yes. Except that’s not actually what did drag Britain out of the Depression. What did was expansionary fiscal austerity. You know, that thing the Tories talked of in 2010 and which everyone laughed at? Somewhat annoyingly I was one of the very few (it’s annoying because I was clearly right in what I was saying) who pointed this out back then.

    When we boil this right down it’s an argument about the effectiveness of monetary policy. Absolutely no one thinks that it has no effect. But there’s many who think that it has no effect at the zero lower bound: when interest rates are zero. That’s really the argument that leads to fiscal policy, that idea that government might tax less, or spend more, blow out that deficit and get the economy moving again. We’ve done all we could with monetary policy and we’ve still got to do something so here’s fiscal policy.

To put it as simply as possible. We’ve two major macroeconomic tools, monetary policy and fiscal. The first is interest rates, exchange rates and money printing and so on. The second is the difference between taxes collected and money spent by government — the government deficit or surplus (note, please, for purists, this is being very simple).

OK, either lever or tool can be used to loosen conditions — gee stuff up — or tighten them. Which we use when is somewhere between a matter of taste and necessarily correct given the circumstances. But clearly the total amount of geeing up out of a recession — or tightening to prevent inflation — or depression is the combination of the two sets of policies, applications of levers and tools.

It’s thus theoretically possible to tighten with one, loosen with the other and gain, overall, either tightening or loosening. Depends upon how much of each you do.

Britain in the 30s tightened fiscal policy. The opposite of what the Keynesians said, the opposite of what the US did and so on. Cut — no, really cut, not just slowed the increase in — government spending and thereby cut the government deficit (might, actually, have gone into surplus, not sure). This is, according to the Keynesian line, something that should make the recession/depression worse.

But at the same time they came off the gold standard — Churchill had taken us back in in 1925 at far too high a rate — and lowered interest rates. That’s a loosening of monetary policy.

As it happens, on balance, the monetary was loosened more than the fiscal was tightened and so we have expansionary fiscal austerity. Which set off a very nice little boom in fact. The mid- to late- 30s in Britain were economic good times. Driven, nicely driven, by a housebuilding boom — the last time the private sector built 300 k houses a year in fact (this is before the Town and Country Planning Act stopped all that). Mixed in was that the motor car was becoming a fairly standard bourgeois item and so housing spread out along the roads.

April 27, 2024

Climate science or climate “science”?

Filed under: Economics, Environment, Media, Science — Tags: , — Nicholas @ 04:00

David Friedman is a very intelligent man and I wouldn’t want to face him in a debate, even on a topic I feel well-informed about. He’s not a scientist and hasn’t made a serious study of climate but he can read the reports and make up his own mind. He’s inclined to believe the data available indicates that the planet is warming but he isn’t convinced that this is enough to justify the kind of authoritarian controls that climate activists demand:

The argument for doing drastic things to prevent global warming has two parts. The first has to do with reasons to think that the earth is getting warmer and that the reason is human action, in particular the production of CO2. The second is the claim that changes we have good reason to expect if we do not take appropriate action to prevent them will have very bad consequences for us.

Much of the criticism I have seen of the argument has to do with the first half, with critics arguing that the evidence for global warming, at least the evidence that it is caused by humans and will continue if humans do not mend their ways, is weak. I do not not know enough to be certain that those criticisms are wrong; climate is a very complicated and not terribly well understood subject.1 But my best guess from watching the debate is that the first half of the argument is correct, that global climate is warming and human action is an important part of the cause. What I find unconvincing is the second half of the argument, the claim that climate change we have good reason to expect would have catastrophic consequences for humans.

Obviously one can imagine climate change large enough and fast enough to be a very serious problem — a rapid end of the current interglacial, for example. If, as I believe is the case, climate is not very well understood, one cannot absolutely rule out such changes.2 But most of the argument is put in terms not of what might conceivably happen but of what we have good reason to expect to happen. I think the outer bound of that is provided by the IPCC models. They suggest a temperature increase of a few degrees centigrade over the next hundred years resulting in a sea level rise of less than a meter.3

Comparing a map of global temperature to a map of population density shows densely inhabited regions with average temperatures from about 10°C to about 30°C, with some of the most densely inhabited regions at the high end of the range. I could find no empty areas that are hotter than all populated areas, hence no areas that are depopulated only because of how hot they are. If people can currently live, work, grow crops over a temperature range of twenty degrees it is hard to imagine any reason why most of them couldn’t continue to do so about as easily if average temperature shifted up by two or three degrees, with a century to adjust to the change.

That raises the question with which I titled this post: Does climate change catastrophe pass the giggle test? Is the claim that climate change on that scale would have catastrophic consequences one that a reasonable person should take seriously?

[…]

A different version of the catastrophist argument is the claim that climate is unstable, that an increase of a few degrees could trigger a much larger increase. That might be plausible if current temperatures were so high that additional warming would raise them above any in the past. But although present temperatures may be higher than any in the past two thousand years, as discussed in an earlier post, the Earth is much more than two thousand years old.

The graph below4 shows estimated global temperature over the past five hundred million years. While present temperature is high relative to the recent past it is cool relative to the more distant past, more than thirteen degrees below the high of the past hundred million years.

We are currently in an ice age, defined by geologists as a period when there is an ice cap on one or both poles. For most of the past five hundred million years there wasn’t.

The claim that we have good reason to expect climate change on a scale that will produce not merely problems for some but catastrophe for many is one that no reasonable person should take seriously.5

    1. As some evidence, as of 2018 the temperature projections produced by the IPCC’s elaborate analysis did a somewhat worse job of predicting actual temperature than a straight line fit from the date when warming restarted after the midcentury pause to the date of each of the first four IPCC reports.

    2. We cannot absolutely rule out catastrophic changes either caused by anthropogenic warming or prevented by anthropogenic warming. There is, in fact, some evidence, discussed in an earlier post, that the reason the next glaciation is not already starting is anthropogenic warming — not current warming due to the industrial revolution but warming that started some eight thousand years ago due to the invention of agriculture.

    3. From Future Climate Changes, Risks and Impacts. RCP8.5 was originally designed as an upper bound on how high future CO2 emissions might be and assumed a level of world population growth that, so far, is not occurring, so should probably not be included.

    4. The headline of the news story I found it in: “A 500-million-year survey of Earth’s climate reveals dire warning for humanity”.

    If life gives you peaches, make cyanide from the pits.

    5. The weaker claim that climate change will produce net costs for humans is, in my view, less obviously true than many believe. For reasons see my past posts on the subject.

April 26, 2024

Economic inefficiencies in the water market? Don’t worry, here’s the government to make it much worse

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

Tim Worstall discusses the economics of water markets in the US … that Senator Elizabeth Warren and Representative Ro Khanna seem determined to make far less efficient if their plans come to fruition:

Senator Elizabeth Warren speaking at the Iowa Democrats Hall of Fame Celebration in Cedar Rapids, Iowa, on 9 June, 2019.
Photo by Lorie Shaull via Wikimedia Commons.

Aficionados for truly stupid political interventions into matters economic will already be aware of the idiocies perpetrated by Senator Elizabeth Warren and Representative Ro Khanna. The two seem to end up as if someone rolled together the ideas of Professor Richard J Murphy and The Guardian opinion page then removed all the insight, subtlety and sensibility. True, not an arduous task removing those three but …

The basic water problem out in the Western US is that the wrong people currently own the water rights. We would therefore like to see more trade in those rights. Warren and Khanna are insisting upon further limitations upon the trade in those rights. This is rampant idiocy.

To set the scene, as folk moved out there they realised that water was not one of those things in great surplus in the area. So, those who got there first made sure that the property rights to the water were assigned to them. Nothing odd about this and rights to a scarce resource do need to be allocated. Otherwise we just end up with the commons problem and the resource is exhausted.

OK. And, y’know, quite a lot of things have changed in the century, century and a half since that Wild West was properly populated. But the descendants of those original farmers still own near all the water rights. Hmm, bit of a problem.

That’s OK, we’ve Coase to advise us here:

    Ronald Coase (1960), “The Problem of Social Cost”

    In the absence of transaction costs, if property rights are well-defined and tradable, voluntary negotiations will lead to efficiency.

    It doesn’t matter how rights are allocated initially …

    … because if they’re allocated inefficiently at first, they can always be sold/traded …

    so the allocation will end up efficient anyway

Now, the distribution — who gets the cash from all of that — is dependent upon that first distribution. But that’s a minor problem compared to the efficient use of water.

So, we want lots of buying and selling. The idiots using $300 of irrigation water to grow $100 worth of alfalfa (pretty much my first English-world piece was on exactly this subject, near 30 years back) can instead sell that same acre-foot to a city, where the two households will happily each pay $500 a year for the half an acre-foot they require.

The asset — the water — has moved from a lower valued (actually, value destructive) use to a higher, the world is richer in aggregate. It doesn’t matter that the farmers get the money because Grandpappy shot all the Injuns. Even without the who gets the money we’re all richer — we’re getting $1k not $100 from the same acre-foot of water.

Coolio!

Enter Warren and Khanna:

    With private investors poised to profit from water scarcity in the west, US senator Elizabeth Warren and representative Ro Khanna are pursuing a bill to prohibit the trading of water as a commodity.

Idiots. Damn fools. Politicians, but I repeat myself triply.

Now, do note they’re not trying to insist that water cannot be bought and sold — not because they don’t want to, they do, but because as Federal politicians they’ve no power whatever over within state markets. However, as Federal politicians they can claim power over commodity markets — the speculators will come from around the country, over state lines and interstate commerce is Federal.

So, as with onion futures, they want to ban water futures.

April 23, 2024

Debating the economic impact of the Raj on India

Filed under: Books, Britain, Economics, History, India — Tags: , , , , , — Nicholas @ 05:00

At The Daily Sceptic, Nigel Biggar looks at a few books making or refuting the narrative on how much or how little British rule in India extracted or contributed to the economic life of the subcontinent:

Beyond slave-trading and slavery, what were the economic effects of British imperial dominance? Can they be reduced to Britain’s leeching wealth from exploited subject peoples?

For over a century, that is what Indian nationalists have claimed. It is also what the politician Shashi Tharoor claims in his 2016 book, Inglorious Empire: What the British Did to India. Against him, however, the Bengali-born, LSE-based economic historian Tirthankar Roy has declared of the nationalist critique that “generations of historians … have shown that it is not [true]”. Pace Tharoor, the statistic that India produced 25 per cent of world output in 1800 and 2–4 per cent in 1900 does not prove that India was once rich and became poor: “[i]t only tells that industrial productivity in the West increased four to six times during this period … The proposition that the Empire was at bottom a mechanism of surplus appropriation and transfer has not fared well in global history”.

On the contrary, the British Empire’s commitment to free trade gave Indian entrepreneurs new opportunities to grow. Some of them visited England in the late 19th Century, observed the workings of manufacturing industry, imported machinery and expertise to India, built factories employing Indians, and then outcompeted Manchester. This is exactly how the Tata Iron and Steel Company began in Bombay – the same company that now owns what remains of the British steel industry.

What is more, colonial governments often protected native producers against British business, in order to moderate economic and social disruption, partly because they genuinely cared for the welfare of native people and partly because they didn’t want to have to manage the political unrest that foreign commercial intrusion could excite. Famously, in 1910-11 colonial officials barred Lever Brothers from acquiring concessions in Nigeria on which to establish palm-oil processing mills with widespread hinterlands, since Africans were already producing for the world markets and generating tax revenue and because the alienation of large areas of land risked provoking native opposition.

Further still, the British were the leading exporters of capital from the mid-19th Century to at least 1929. Between 1876 and 1914, Britain invested over a third of its overseas capital in the Empire, over 19% of it in India. Of course, British investors often made a profit out of this. That’s the thing about investment: you tend to want to grow your money, not waste it. But if the British gained, so did colonial peoples. Take railways. By 1947, British India had 45,000 miles of railway track, most of it constructed with private capital, whereas five years later un-colonised China still had less than 18,000 miles. For sure, the railways served military purposes. But they also served commercial and economic ones: one estimate reckons that when the railway network reached the average district, real agricultural income rose by about 16%. And it served the welfare purpose of efficient famine relief, too.

A basic reason why the British sent their capital overseas to the Empire, enabling the growth of businesses and the building of infrastructure, was that colonial states provided sufficient political stability and legal certainty to make the risks of financial ventures worth taking. (Badenoch hints at this in her reference to the economic effects of the Glorious Revolution of 1688.) That explains why Australia’s economic growth compares so favourably with that of many Latin American countries, and why, between the 1860s and 1890s, Australia was the richest country on earth.

In sum, the considered judgement of the Swiss historian Rudolf von Albertini, whose work – according to the world’s “leading imperial economic historian”, David Fieldhouse – was based “on exhaustive examination of the literature on most parts of the colonial world to 1940”, was simply this: “colonial economics cannot be understood through concepts such as plunder economics and exploitation”.

QotD: Who cares about you?

Filed under: Economics, Quotations — Tags: , , — Nicholas @ 01:00

During my student days at a UCLA economics department faculty/graduate student coffee hour in the 1960s, I was chatting with Professor Armen Alchian, probably the greatest microeconomic theory economist of the 20th century. I was trying to impress Alchian with my knowledge of statistical type I and type II errors. I explained that unlike my wife, who assumed that everyone was her friend until they prove differently, my assumption was everyone was an enemy until they proved otherwise. The result: My wife’s vision maximized the number of her friends but maximized her chances of betrayal. My vision minimized my chances of betrayal at a cost of minimizing the number of my friends.

Alchian, donning a mischievous smile asked, “Williams, have you considered a third alternative, namely, that people don’t give a damn about you one way or another?” Initially, I felt a bit insulted, and our conversation didn’t go much further, but that was typical of Alchian — saying something profound, perhaps controversial, without much comment and letting you think it out.

Years later, I gave Alchian’s third alternative considerable thought and concluded that he was right. The most reliable assumption, in terms of the conduct of one’s life, is to assume that people don’t care about you one way or another. It’s an error to generalize that people are friends or enemies, or that people are out to either help you or hurt you. To put it more crudely, as Alchian did, people don’t give a damn about you one way or another.

Walter E. Williams, “Who Cares About You?”, Townhall.com, 2019-10-01.

April 19, 2024

QotD: The “Greatest Generation”

Filed under: Economics, Government, History, Quotations, USA — Tags: , — Nicholas @ 01:00

Our parents had learned some wrong lessons from the ’20s, ’30s, and ’40s. They learned to love government too well. They learned that government was what rescued you from depression and war. Our parents were very trusting of large governmental institutions. The liberalism that was a seed of the radicalism to come was in our parents, even when our parents were Republicans. They had taken large government for granted.

P.J. O’Rourke, interviewed by Scott Walter, “The 60’s Return”, American Enterprise, May/June 1997.

April 16, 2024

QotD: Binding and non-binding rules

Filed under: Economics, Law, Quotations — Tags: , , — Nicholas @ 01:00

Describing situations in which violating a sound rule will make the world a better place is surprisingly easy. The reason for this ease is that the very purpose of rules – “the reason of rules” – is that they are tools to better enable us always-imperfectly informed human beings to successfully navigate a world filled with uncertainty. All that such descriptions require is the assumption that we human beings know more than we know.

An omniscient being would be foolish to bind itself to rules.

When we adopt a rule, we wisely admit our ignorance. For a clever assistant professor or ambitious politician to then describe situations in which violating this or that rule will make the world a better place is to achieve absolutely nothing. Although such descriptions often appear to be ingenious discoveries of means for improving the human condition, such descriptions are nearly always nothing but trite demonstrations that if we knew what we do not and cannot know, then acting in disregard of the rule would bring about a state of affairs better than the state of affairs that would be brought about by following the rule.

Well duh.

As a rule, whenever you encounter someone peddling a scheme for improving the world by giving the state discretion to act in violation of well-established rules – for example, to make workers better off by blocking the operation of the price system with minimum wages, or to enrich residents of the domestic economy by substituting free trade with “strategic trade policies” or “optimal tariffs” – recognize that these scheme peddlers arrogantly assume that they or those who will carry out their schemes possess knowledge and information that human beings, as a rule, do not and cannot possibly ever possess.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2019-08-20.

April 11, 2024

All the ways A few of the ways Canada is broken

Filed under: Cancon, Economics, Government, History — Tags: , , , , , , , — Nicholas @ 05:00

In The Line, Andrew Potter outlines some of the major political and economic pressures that prompted the formation of the Dominion of Canada in 1867, then gets into all the ways some of the myriad ways that Canada is failing badly:

It is useful to remember all this, if only to appreciate the extent to which Canada has drifted from its founding ambitions. Today, there are significant interprovincial barriers to trade in goods and services, which add an estimated average of seven per cent to the cost of goods. Not only does Canada not have a free internal market in any meaningful sense, but the problem is getting worse, not better. This is in part thanks to the Supreme Court of Canada which continues its habit of giving preposterously narrow interpretations to the clear and unambiguous language in the constitution regarding trade so as to favour the provinces and their protectionist instincts.

On the defence and security front, what is there to say that hasn’t been said a thousand times before. From the state of the military to our commitments to NATO to the defence and protection of our coasts and the Arctic to shouldering our burden in the defence of North America, our response has been to shrug and assume that it doesn’t matter, that there’s no threat, or if there is, that someone else will take care of it for us. We live in a fireproof house, far from the flames, fa la la la la. Monday’s announcement was interesting, but even if fully enacted — a huge if — we will still be a long way from a military that can meet both domestic and international obligations, and still a long way from the two per cent target.

As for politics, only the most delusional observer would pretend that this is even remotely a properly functioning federation. Quebec has for many purposes effectively seceded, and Alberta has been patiently taking notes. Saskatchewan is openly defying the law in refusing to pay the federal carbon tax. Parliament is a dysfunctional and largely pointless clown show. No one is happy, and the federal government is in some quarters bordering on illegitimacy.

All of this is going on while the conditions that motivated Confederation in the first place are reasserting themselves. Global free trade is starting to go in reverse, as states shrink back from the openness that marked the great period of liberalization from the early 1990s to the mid 2010s. The international order is becoming less stable and more dangerous, as the norms and institutions that dominated the post-war order in the second half of the 20th century collapse into obsolescence. And it is no longer clear that we will be able to rely upon the old failsafe, the goodwill and indulgence of the United States. Donald Trump has made it clear he doesn’t have much time for Canada’s pieties on either trade or defence, and he’s going to be gunning for us when he is returned to the presidency later this year.

Ottawa’s response to all of this has been to largely pretend it isn’t happening. Instead, it insists on trying to impose itself on areas of provincial jurisdiction, resulting in a number of ineffective programs — dentistry, pharmacare, daycare, and now, apparently, school lunches — that are anything but national, and which will do little more than annoy the provinces while creating more bureaucracy. Meanwhile, the real problems in areas of clear federal jurisdiction just keep piling up, but the money’s all been spent, so, shrug emoji.

What to do? We could just keep going along like this, and follow the slow-mo train wreck that is Canada to its inevitable end. That is is the most likely scenario.

April 10, 2024

We can expect to see a lot more commercial bankruptcies in future

Filed under: Britain, Business, Economics — Tags: , , — Nicholas @ 05:00

Although Tim Worstall is talking specifically about commercial properties in the UK, I suspect the same basic mechanism is in place here in Canada, the US, and many other countries and the outcomes will be broadly similar: declining retail sales intersecting with rising rents do not result in healthy retail markets.

The specific point is something that has become common to near universal in commercial property leases in the decades since the War. This is that rents can only ever be revised upwards.

So, the standard thing about commercial property is that it’s not so much rented as leased. The difference is not wholly clear but, roughly enough, you can leave a rental and you can’t leave a lease. That is, if you’ve a 21 year lease and you want to leave before the 21 years are up then it’s up to you to find another tenant. Not the landlord — and if that tenant that you do find then leaves/goes bust/doesn’t pay the rent then you have to. At least a rental you can leave.

OK — but that’s all pretty standard. The UK has one more thing. Obviously, there are rent reviews during the period of the lease. Inflation taught landlords that this was something they needed to do after all. OK — but the standard, and it really is standard in UK commercial leases, rent review is upwards only. Now, for most of this past 70 years this hasn’t been a problem. The country has been getting richer, inflation has persisted, retail’s been ever more of the economy, rents have been going up.

Ah, but now, eh? Firstly, we’ve the internet eating retail.

About, and roughly, 1% of the total market each year moves online. We all thought that the lockdown boom was going to persist and it didn’t. This caused all sorts of problems for all sorts of people — Boohoo ended up terribly overstocked. Made.com was able to come to market and then went bust as the right hand end of that chart happened and we returned to trend after the blip. Revolution Beauty had its own problems but the overvaluation was at least partly to do with this and so on.

But this had already been happening — Intu went bust well before the pandemic, as we know. It’s now about true that 15% or more of UK retail space is empty. Because sales are moving online. This — naturally enough — means that prices, rents, of retail are falling. Well, OK.

But now this meets upwards-only rent reviews. If you’re a new retailer looking for space then the High Streets are your mollusc of choice. You can probably get in on low rents, substantial rent-free periods and even get the landlord to pay your fitting out costs (landlords would much rather give rent-free periods, pay costs of moving in, than let at low rents. Because the terms of their own mortgages and loans make it better for them to keep headline rents stable whatever the hell the truth of the real value is). But if you’re a long established retailer paying high street rents then you’re screwed.

Your new competition might be able to get in by paying half the rent you are. And yes, rent is a really, really, big part of retail in the UK. You are, in fact, fucked and right royally.

QotD: Aprons

Filed under: Economics, History, Quotations, USA — Tags: , , , , , — Nicholas @ 01:00

It’s like the thing with the aprons, that science fiction writers older than I think that Heinlein was a sexist, because he has women wearing aprons. Instead of “Everyone who worked with staining liquids and fire wore aprons. Because clothes were insanely expensive, that’s why.” We stopped wearing aprons [because today] a pack of t-shirts at WalMart is $10. Nothing to do with sexism.

Sarah Hoyt, “Teaching Offense”, According to Hoyt, 2019-10-25.

April 8, 2024

“The carbon rebate seems to be one of those rare examples of people getting mad at receiving government money rather than being grateful”

Filed under: Cancon, Economics, Environment, Government, Media, Politics — Tags: , , , — Nicholas @ 03:00

In The Line, Jen Gerson makes a strong argument that the vaunted (by Justin Trudeau and the Liberal Party) carbon tax rebate is actually the big problem with the carbon tax, not the “Conservative misinformation” constantly being pointed at by the government’s paid accomplices in the mainstream media:

Is the purpose of the Liberals’ carbon tax to materially reduce carbon emissions — or is it a wealth redistribution program? I ask because every time the Liberals defend the carbon tax by resorting to the awesomeness of the rebate, what they cease to talk about is how effective it is at actually reducing carbon emissions.

Instead, we fall into an endless series of counterproductive debates about whether what individuals are getting from the rebate equals what they’re paying out in tax. And that debate is repeated every quarter, and each time the carbon tax rises. In other words, our entire political discourse about the tax is centred on wealth redistribution — not emissions.

That makes people suspicious of the government’s actual goals, and skeptical about its claims. This, again, is a problem of message dilution. If you cannot clearly express your intentions, then you’re not going to get political buy-in to your aims. This problem is particularly acute on a policy that is — by definition — demanding a sacrifice of cash and/or quality of life by Canadians. People can get on board with sacrifice, but only if it’s tied to a clear, obtainable, and material objective.

[…]

And here’s where we get into the real dark heart of the problem.

It’s the rebate itself.

I understand why the Canada Carbon Rebate happened. The government wanted to introduce a carbon tax without disproportionately penalizing the poor — the demographic least able to make the investments and lifestyle changes necessary to respond to the tax. But did that relief have to come in the form of a rebate?

Well, no.

There are lots of methods a government can use to ease poverty. But governments love themselves a rebate. Why? Because rebates are normalized vote buying. One that all political parties are guilty of using. The Liberals implemented the rebate thinking Canadians would hit their mailboxes every quarter, see a few hundred bucks, and get warm fuzzy feelings for Papa Trudeau and the natural governing party. “Government’s looking out for me!”

Getting government cheques is popular, and the Liberals were no doubt trying to replicate the appeal of the Canada Child Benefit.

But that didn’t happen here. The carbon rebate seems to be one of those rare examples of people getting mad at receiving government money rather than being grateful. Why?

Well, may I suggest that it’s because every time people open up those cheques, instead of processing the dopamine hit of “free” money, they’re instead reminded of how much they had to pay in to get it. They do the math in their head, think about their rising grocery bills and gas, and come away thinking “not worth it”. Every single quarter, millions of Canadian households are feeling as if they are paying dollars to get dimes — and it’s pissing them right off. Further, demanding they acknowledge they’re better off in the exchange is only adding salt to the wound. Throwing Parliamentary Budget Officer (PBO) reports at them doesn’t change their minds. It just pisses them off more.

To put it more pithily — a benefit is a gift. A rebate is a value proposition. And a hell of a lot of Canadians are looking at this rebate and determining that its value is wanting — all the more so as the goals of that purchase haven’t been clearly articulated.

April 5, 2024

Canada’s carbon tax – “… no emissions policy that doesn’t start with banning private jets can be called ‘fair’ with a straight face”

Filed under: Cancon, Economics, Government — Tags: , , , , — Nicholas @ 05:00

In The Line, Clarke Ries points out the incredibly uncomfortable truth that no matter how the federal government tries to hide it, the carbon tax regime is going to be painful and the pain is going to be absorbed much more by the rural poor than anyone else:

Minister of Environment and Climate Change Steven Guilbeault, 3 February 2020 (when he was Canadian Heritage Minister).
Screencapture from CPAC video.

Consumption taxes are a straightforwardly-effective policy tool. You simply increase the price of the resource you want to see used less and let people adapt to the simulated scarcity via ingenuity, frugality, lifestyle change, repricing their goods and services, etc. The government doesn’t dictate solutions, it lets people find their own. In the process, the consumption tax dispassionately reveals who’s making the most valuable use of that resource.

[…]

So the question remains, who uses a lot of carbon but doesn’t make a lot of money doing it? Who lives in drafty old single-family houses? Who uses archaic methods of keeping those houses warm, like furnaces that run on heating oil? Who has to drive halfway around the world to reach the nearest grocery store and halfway to the moon for the nearest medical clinic? Who’s making that drive in a battered old ride with terrible fuel economy?

The rural poor.

Not the farmers or the ranchers, who mostly make plenty of dough and often know their way around America’s higher-end resort towns, but the rural poor. The kind of people you disproportionately find in Newfoundland outports, eking out a tenuous living as they wait for the cod to return. You know, reliable Liberal voters.

Put another way, a neutrally-applied carbon tax goes after Maritimers first and hardest — forcing them to close shop on their romantic traditional lifestyle and move into apartment blocks in the nearest city, where they’ll earn more for their labour and emit less carbon doing it.

[…]

Remember: for the carbon tax to do what it says on the tin, somebody has to lose. For the carbon tax to be anything other than a purposeless pain in the ass, somebody — a lot of somebodies, frankly, if the Liberals are serious about cutting carbon emissions to 40 per cent under 2005 levels — must be forced to make significant and unpleasant lifestyle changes.

So let’s assume the Parliamentary Budget Office is right, and that Atlantic Canadians are now, after a second round of special supplements and exemptions, definitely net beneficiaries of the carbon tax. All it’s bought the Liberals is a reprise of the same question: who’s for dinner?

Who’s going to trade in their beater for bus tickets? Who’s going to raise their kids in a condo tower instead of a single-family home? Who’s going to start taking their midwinter vacation in the province next door instead of Palm Springs or Costa Rica? Who’s going to shiver on a cold night instead of raising the thermostat?

Only the most diehard of optimists could believe that the roster of ritual sacrifices will substantially consist of financially-comfortable Canadians. The people who can afford to make investments that reduce their carbon emissions without materially sacrificing their lifestyles will do so. A handful will start biking to work during the summer. Others will install solar panels on top of their detached houses — which are mostly located in neighbourhoods where you’re not even allowed to build a condo tower — and that’s going to be that.

Beneath all the aspirational language, what an effective carbon tax actually does is throw the government into a cage match with Canada’s working class. The truth behind the Liberals’ woes on this file is that as long as they’re committed to the carbon tax as a tool for fighting climate change, their only real choice is which part of the working class they land on when they come off the top rope.

In the still-ongoing “war of the sexes”, when can women just accept they’ve won and cease hostilities?

Filed under: Business, Economics, Education, Media, Politics, USA — Tags: , , , — Nicholas @ 04:00

At the amusingly named Handwaving Freakoutery, you can see a scorecard for the war of the sexes that has been ongoing since I was a child and seems no closer to ending than back in the 1960s:

I say this to make it absolutely clear that unlike a lot of boorishly banal material you might encounter within the wretchedly named “Manosphere”, this is not intended to be a whiny article. I’m not complaining, nor am I calling for societal change or action. I’m simply wondering exactly how dominant female privilege has to get before they declare victory and take their boot off the necks of men. I really don’t know the answer to this question, but we’ll speculate about that below after the wall of graphs. HWFO loves graphs.

Herein we will go point by point through as many measurable societal markers as I can think of, leaving no marker unmarked, and put together a Gender War Scoreboard describing as accurate a snapshot as possible of the current state of the United States. Then we’ll close with some analysis about how badly it would have to get before the women finally just declare victory and move on. This post shall be too big for email.

To assign our score, we will look at sets of data that fall generally into two categories. For victimization ratios and similar, we’ll just look at percentage by gender. For comparing two uncapped sets of data, such as life expectancy, we’ll look at a ratio and make them both add to 100 for an apples-to-apples comparison. Then we’ll add them all up at the end to tally the score.

Salary

HWFO covered the gender wage gap in 2022, but I’ll summarize it here so you don’t have to read back. According to a 2008 analysis by the Department of Labor, now 16 years old, the raw gender wage gap was 20.4% in 2007:

Most of the gap was explainable by career choice and lifestyle choice differences:

When compared properly that looks like this:

Sixteen years ago, the bits of the gender wage gap that weren’t explained by career and life choice differences only totaled 6%. This fact has been known for a decade and a half and is constantly hidden from view by Pew, the NLWC, and any other major organization that profits from the perception that this gap is large and persistent. It has also assuredly closed to narrower than that 6% in the ensuing decade and a half, but nobody’s replicated the Department of Labor analysis. Look closely at the effects in the green bar identified by the Department of Labor. “Child birth” is how you become a mother. “Child care” is something mothers do. “Working part time” is something mothers do. “Time out of the labor force” is something mothers take. “Occupational choice” is something women change when they become mothers. Here are some graphs from Kleven et al, March 2019:

The solid lines are women. In every studied area, the women make equal or more than the men do up until the birth of their first child, and then they make less. The gender wage gap difference is in the choice to have children. Women choose to make professional concessions to raise a family while the men don’t. Is this fair? Some might say no, but only if they also don’t want to be the primary caregiver for their kids. Some would say yes, for the following two reasons: (1) women choose this, especially in feminist societies, but also (2) men are punished socially for choosing this. If you do not believe me, go make two fake male Tinder profiles with identical cute photos in them, and in the bio of one say “corporate lawyer” and the other say “part time daycare worker” and see which one gets more hits. Then do the same with a female profile. Men are socially punished by women for making the career concession, women are not socially punished by men for making it.

Often when these sorts of “equal pay for equal work” studies are properly controlled for mothering and career choice, they find that men are paid less than women for equal work. Google was pretty famously forced by their neo-progressive staff to do an internal analysis of the subject, and uncomfortably discovered they were overpaying women for being women on an “equal work” basis. The results were twofold. First Google paid all the men a one time bonus, then Google quietly never investigated it again so they could get back to paying women more.

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