This is an old rule of thumb, no more, from an experienced waitron unit.
The table that orders a starter, main and a bottle of wine – that just about breaks even for the restaurant. You can mix and match this a bit. Dessert instead of the starter, that sorta thing. But the costs of the building, the staff, the electricity, the stock that goes off, the cost of capital itself, all those things, mean that the basic restaurant experience just about covers its costs.
It’s the having the one thing extra that makes the money, the profit. A drink before the meal, having both a starter and a dessert to add to the main. The second bottle of wine, or the digestif with the coffee. This is why the waiter is so eager for you to have any one or more of these “extras”. The margin over food costs – food costs usually being around 30% of menu price – on those additions is exactly what provides a profit to the business that is the restaurant.
As to why, well, it’s the same reason that the menu prices of some well known item are going to be roughly the same across restaurants. Competition is fierce in the business. That means headline prices are pushed down to where they only just, if even that, cover costs. On exactly the same basis as Ryanair charging you spit for the seat and then a fortune for the air you breathe onboard. You get the punter in with the £20 for two steak dinners then hope like Hell they order the vanilla soup and also the vegetable ice cream in order to make your nut.
Tim Worstall, “Bar Owner Complains Of People Drinking Tap Water – Oi! Where’s My Profits?”, Continental Telegraph, 2019-05-27.
March 4, 2023
QotD: Profit margins in the restaurant trade
February 28, 2023
QotD: Politicians respond to different economic incentives than the rest of us
The temptation is to delay the tough times until your successor can carry the can.
Poor old Keynes inadvertently gave politicians the answer they were looking for – the idea that during the downturn, the government should spend money into the economy to keep it going along nicely. Making sure that those lifeguards sacked from the Skegness lido can swiftly get jobs working at a government Skegness lido prevents them claiming the dole, and keeps them in the economy earning and spending until the economy washes out all the malinvestment and starts growing again. At which point the government Skegness lido closes and the lifeguards go to work at a lido somewhere where the biting Easterly wind doesn’t sandblast your skin off. The government has bridged the gap.
There’s one problem.
The government has no money of its own, so where will it get the money for their lido?
Well, Keynes said it should run a surplus during the good times and stash that surplus money away so it can be used during the downturn – a national rainy-day fund, if you will.
But guess what? Politicians don’t run surpluses.
Why would they? Every penny spent making lives better for voters today makes it more likely they will vote for you. And every penny saved against a rainy day makes it possible for your rivals to win votes tomorrow, by doing the same once they are in power.
So politicians don’t ever HAVE a rainy day fund. But that doesn’t stop them wanting to bridge the gap.
So they borrow the money.
And now what they are doing is not Keynesian, or even neo-Keynesian, but pseudo-Keynesian
By bridging the current gap with borrowed money, they simply make sure that the next gap will be costlier to bridge. Because the interest on the borrowing means that the gap will be wider.
But that’s not even the biggest problem – the biggest problem is that the gap is intrinsically important. We NEED it, to give us pause.
Whereas bridging it enables us to carry on being silly and prevents the misallocations from being flushed out – a lido remains operating in Skegness despite having no customers, and the lifeguards continue to work. Their lifesaving skills (which should be fruitfully employed elsewhere) stagnate at a lido with no punters. Their customer service skills deteriorate as the customers disappear, and what they learn instead is how to sit in a chair and stare into space. Their skills are degrading. Hysteresis, technically.
And so by delaying the collapse of the Skegness lido in pursuit of benign conditions for the voters, the government destroys the skills of our workforce.
Sowell was right – the problems we battle today were caused by the government’s interventions yesterday.
Surely using government to solve our problems is like a man quenching his thirst with seawater?
Alex Noble, “Drinking Brine”, Continental Telegraph, 2019-06-14.
February 25, 2023
QotD: Feudalism versus “Manorialism”
Bret Devereaux, “Collections: Bread, How Did They Make It? Part IV: Markets, Merchants and the Tax Man”, A Collection of Unmitigated Pedantry, 2020-08-21.
February 21, 2023
“… sub-replacement fertility is probably an inevitable product of female emancipation”
In Ed West’s weekly round-up, he ends the post on this rather grim (from a demographic viewpoint) note:
In The Guardian, Martha Gill on the great vexation of modern life: people can’t have as many children as they’d like.
OK: so it’s about social structures, then? Lack of childcare, unequal parental leave and career penalties for mothers. Not so – or not primarily. In our fecund recent past, remember, career penalties for mothers were even higher. Mothers still suffer a career penalty almost everywhere, but attempting to remove it doesn’t seem to alter their decisions that much. Since 2008, amid unequalled progress in gender equality and some of the most generous parental support schemes on the planet, birthrates in Sweden, Norway and Iceland have fallen precipitously. Nordic countries are, comparatively, parental utopias, yet birthrates tick along slightly above the EU average and still well below the replacement rate.
I agree with her basic premise. Aside from Georgia, no country has successful brought fertility rates above replacement rates, whatever the childcare incentives, because sub-replacement fertility is probably an inevitable product of female emancipation. In particular the issue is that women don’t tend to marry men with lower education and income levels, so the modern system ensures that a large minority of men are simply unmarriagable.
I’m not convinced by Gill’s solution, since outcomes for the children of single parents are way worse on average, and even with huge state support it’s going to be incredibly hard to raise children alone. Even without grandparental support it’s hard with two parents. I also think this problem is inevitably helping the drive towards poly-acceptance. As Rob Henderson wrote earlier this month:
In a deregulated market, power laws dominate. This is true not only in the economic realm, but in the romantic realm as well. At no point in history have all men in a given society been equally desirable. Today, though, the disparity between men is particularly pronounced. And the gap shows no sign of slowing or closing. The polyamorous movement may be a reaction to shifts in sex ratios among attractive individuals. Many individuals who do not identify as poly are likely practicing some version of it, knowingly or otherwise, as the case of West Elm Caleb demonstrated. The majority desirable young males using dating apps almost certainly have at least three women in their rotation, if not more.
As with so many things, post-Christian society is reverting to pre-Christian norms, in this case the norm where a large proportion of men were thrown onto the romantic scrapheap.
February 20, 2023
Thirteen reasons the Dutch did better financially than the English in the Seventeenth Century
In the latest Age of Invention newsletter, Anton Howes investigates the huge differences between the rival English and Dutch financial markets in the 17th century:
The courtyard of the exchange in Amsterdam (De binnenplaats van de beurs te Amsterdam), 1653.
Oil painting by Emanuel de Witte (1617-1692) from the Museum Boijmans Van Beuningen collection via Wikimedia Commons.
One of the weird things about Britain, despite its being the birthplace of the Industrial Revolution, is that its financial infrastructure was for a long time remarkably backward. Its “Financial Revolution”, by which both people and the state began to borrow at ever lower interest rates, only really took off in the early eighteenth century — long after London’s extraordinary growth in 1550-1650, when it had suddenly expanded eightfold to become one of Europe’s most important commercial hubs. Indeed, even for much of the late seventeenth century, England lacked many of the most basic financial institutions that had been used for decades and decades by their most important rival and trading partner, the Dutch Republic.
I was especially intrigued when I stumbled across a discussion of Dutch policies and customs, written up in around 1665 by the young merchant Josiah Child, and published a few years later: a kind of wishlist of many of the things that made the Dutch so wealthy, and which the English continually failed to emulate:
- The Dutch councils of state and war always included merchants who had experience of trading and living abroad — Child was perhaps just angling for some influence here, but for all that merchants were getting more influential, in England they were not actually in charge.
- Gavel-kind succession laws, whereby all children got an equal share of their parents’ estates, rather than it all going to the eldest. English primogeniture, by contrast, apparently left a lot of gentlemen’s younger sons having to become apprenticed to merchants.
- High regulatory standards for goods. A barrel of Dutch-packed herring or cod would apparently be accepted by buyers just by viewing the marks, without having to open them up to check. English-packed goods, by contrast, were rarely trusted because the fish would turn out to be rotten or even missing — the English regulators’ stamps of approval were reputedly given to anyone who would pay.
- Encouragement for inventors of new products, techniques, and import trades, who received rewards from the state, and not just temporary monopoly patents.
- Ships, called fluyt, which were cheaper to build, required fewer sailors, and were easier to handle. Despite being only very lightly armed, they sailed in fleets for protection, when necessary being convoyed by ships of war. English trading ships, by contrast, were each heavily armed, but with those cannon taking up room and weight that could have been used for carrying merchandise.
- Education of all children, even girls, in arithmetic and keeping accounts. As Child put it, this infused in the Dutch “a strong aptitude, love, and delight” for commerce. It also meant that husbands and wives were real partners in many businesses — something that impressed almost all foreign visitors to the Netherlands.
- Low customs duties, but high consumption taxes. Very low customs duties, on both imports and exports, meant that it was often very profitable to trade with the Netherlands. The Dutch were famed for their many ships, and for their granaries bursting with grain, despite growing hardly any trees or crops themselves. To fund their state, they instead overwhelmingly relied on the gemene middelen — taxes on the sale of wine, beer, meat, fuel, candles, salt, soap, flour, cloth, and a host of other goods, with many of the higher rates reserved for expensive luxuries. Much like modern value-added taxes, these taxes on consumption raised revenue while preserving the all-important incentive to save and invest.
- Thrifty living — which, come to think of it, was probably related to the high consumption taxes, although Childs doesn’t seem to have noticed the connection. Dutch thrift was thought by the English to be especially useful because it allowed wage costs to be kept low — essential for maintaining competitiveness in international markets — while preventing the country having a trade deficit. The English always worried they were sending too much of their silver abroad to pay for French wines and other luxuries, but the Dutch appeared to have prevented this without resorting to import tariffs that might annoy trading partners and prompt retaliation.
- Religious toleration, which attracted all sorts of industrious immigrants to bring their families and wealth. (Incidentally, as I’ve mentioned before, this was also one of the key attractions of Livorno, set up by the Medici Dukes of Tuscany to be a major trading hub.)
- The use of the Law-Merchant, which meant that all controversies between merchants and tradesmen were decided in just 3 or 4 days’ time. England, rather strangely for such an increasingly commercial nation, did not develop merchant courts with a specific jurisdiction or a distinct body of merchant law — disputes instead had to be resolved in the royal common-law or equity courts, in the Admiralty court, or else abroad. The English courts, however, were often slow. Child complained that cases often took half a year, and often much longer. (Incidentally, slow and rotten justice in the Court of Chancery, the key equity court used by merchants in England, was one of the reasons Francis Bacon was impeached by Parliament and sacked as Lord Chancellor.)
- Transferrable bills of exchange — in other words, the circulation of credit notes as a currency. These were not properly supported by English laws, but allowed Dutch merchants to trade a lot more frequently. English merchants often had to wait some six months to a year before receiving all the coin from selling their foreign goods in London, so as to purchase goods again to make fresh trades. They spent much of their time chasing shopkeepers for payment. But the Dutch, by being able to easily buy and sell their credit notes, could “turn their stocks twice or thrice in trade”, immediately settling their accounts and making fresh purchases. (I intend to look into this in a lot more detail soon, as finding a way to bills of exchange transferrable in England appears to have been a major project for many of the mid-seventeenth-century inventors and improvers — after just a cursory glance, transferability was only secured in law as late as 1704.)
- Banks. Or rather, as Child actually put it, “BANKS”. In England many of the functions of banks gradually evolved from the practices of individual goldsmiths and the scriveners — legal clerks who specialised in property transfers and mortgages. There was certainly nothing so secure as the municipal Wisselbank of Amsterdam, established in 1609, which had various monopoly powers as a clearing-house for bills of exchange and was backed by a vault full of bullion. Nor the municipal Bank van Lening, established in 1614, which was a pawnbroker modelled on the Italian Monte di Pietà, or mounts of piety, designed to make small and low-cost loans to the poor.
- “PUBLIC REGISTERS” — again capitalised by Child — of all lands and houses sold or mortgaged. This item on the policy wishlist would not be ticked off for England until two centuries later, but the key advantage was to prevent lawsuits over land titles — still cited as a major problem even in the 1690s — and so make land more genuinely secure for mortgages.
Finally, the result of many of these policies was the Dutch had significantly lower interest rates — often just 3-4% when the English were still lending and borrowing at 6-8%. Indeed, this list was made because of a long-standing English policy debate I’ve been researching, on whether to lower the legal maximum rate of interest.
February 15, 2023
Refuting The End of History and the Last Man
Freddie deBoer responds to a recent commentary defending the thesis of Francis Fukuyama’s The End of History and the Last Man:
… Ned Resnikoff critiques a recent podcast by Hobbes and defends Francis Fukuyama’s concept of “the end of history”. In another case of strange bedfellows, the liberal Resnikoff echoes conservative Richard Hanania in his defense of Fukuyama — echoes not merely in the fact that he defends Fukuyama too, but in many of the specific terms and arguments of Hanania’s defense. And both make the same essential mistake, failing to understand the merciless advance of history and how it ceaselessly grinds up humanity’s feeble attempts at macrohistoric understanding. And, yes, to answer Resnikoff’s complaint, I’ve read the book, though it’s been a long time.
The big problem with The End of History and the Last Man is that history is long, and changes to the human condition are so extreme that the terms we come up with to define that condition are inevitably too contextual and limited to survive the passage of time. We’re forever foolishly deciding that our current condition is the way things will always be. For 300,000 years human beings existed as hunter-gatherers, a vastly longer period of time than we’ve had agriculture and civilization. Indeed, if aliens were to take stock of the basic truth of the human condition, they would likely define us as much by that hunter-gatherer past as our technological present; after all, that was our reality for far longer. Either way – those hunter-gatherers would have assumed that their system wasn’t going to change, couldn’t comprehend it changing, didn’t see it as a system at all, and for 3000 centuries, they would have been right. But things changed.
And for thousands of years, people living at the height of human civilization thought that there was no such thing as an economy without slavery; it’s not just that they had a moral defense of slavery, it’s that they literally could not conceive of the daily functioning of society without slavery. But things changed. For most humans for most of modern history, the idea of dynastic rule and hereditary aristocracy was so intrinsic and universal that few could imagine an alternative. But things changed. And for hundreds of years, people living under feudalism could not conceive of an economy that was not fundamentally based on the division between lord and serf, and in fact typically talked about that arrangement as being literally ordained by God. But things changed. For most of human history, almost no one questioned the inherent and unalterable second-class status of women. Civilization is maybe 12,000 years old; while there’s proto-feminist ideas to be found throughout history, the first wave of organized feminism is generally defined as only a couple hundred years old. It took so long because most saw the subordination of women as a reflection of inherent biological reality. But women lead countries now. You see, things change.
And what Fukuyama and Resnikoff and Hanania etc are telling you is that they’re so wise that they know that “but then things changed” can never happen again. Not at the level of the abstract social system. They have pierced the veil and see a real permanence where humans of the past only ever saw a false one. I find this … unlikely. Resnikoff writes “Maybe you think post-liberalism is coming; it just has yet to be born. I guess that’s possible.” Possible? The entire sweep of human experience tells us that change isn’t just possible, it’s inevitable; not just change at the level of details, but changes to the basic fabric of the system.
The fact of the matter is that, at some point in the future, human life will be so different from what it’s like now, terms like liberal democracy will have no meaning. In 200 years, human beings might be fitted with cybernetic implants in utero by robots and jacked into a virtual reality that we live in permanently, while artificial intelligence takes care of managing the material world. In that virtual reality we experience only a variety of pleasures that are produced through direct stimulation of the nervous system. There is no interaction with other human beings as traditionally conceived. What sense would the term “liberal democracy” even make under those conditions? There are scientifically-plausible futures that completely undermine our basic sense of what it means to operate as human beings. Is one of those worlds going to emerge? I don’t know! But then, Fukuyama doesn’t know either, and yet one of us is making claims of immense certainty about the future of humanity. And for the record, after the future that we can’t imagine comes an even more distant future we can’t conceive of.
People tend to say, but the future you describe is so fanciful, so far off. To which I say, first, human technological change over the last two hundred years dwarfs that of the previous two thousand, so maybe it’s not so far off, and second, this is what you invite when you discuss the teleological endpoint of human progress! You started the conversation! If you define your project as concerning the final evolution of human social systems, you necessarily include the far future and its immense possibilities. Resnikoff says, “the label ‘post-liberalism’ is something of an intellectual IOU” and offers similar complaints that no one’s yet defined what a post-liberal order would look like. But from the standpoint of history, this is a strange criticism. An 11th-century Andalusian shepherd had no conception of liberal democracy, and yet here we are in the 21st century, talking about liberal democracy as “the object of history”. How could his limited understanding of the future constrain the enormous breadth of human possibility? How could ours? To buy “the end of history”, you have to believe that we are now at a place where we can accurately predict the future where millennia of human thinkers could not. And it’s hard to see that as anything other than a kind of chauvinism, arrogance.
Fukuyama and “the end of history” are contingent products of a moment, blips in history, just like me. That’s all any of us gets to be, blips. The challenge is to have humility enough to recognize ourselves as blips. The alternative is acts of historical chauvinism like The End of History.
February 14, 2023
You need a tailor. And a cobbler.
At least, that’s Tom Knighton‘s take:
“The Desbecker-Block Tailoring Co. Buffalo, N. Y. Tailors to all America. We’ve a man on the spot. He takes your measure – we do the rest.” by Boston Public Library is licensed under CC BY 2.0 
.
I’m now of the opinion that every man needs a tailor and a cobbler to go along with their barber.
Why? Because quality has a quantity all its own.
Yeah, I know that phrase usually goes the other way around, but we’re not talking about warfare where you need a lot of tanks and airplanes. We’re talking about clothes and accouterments. You can only wear one suit and one pair of shoes at a time. You’ve only got one head to wear a hat on. You don’t need 500 of each to have a well-rounded wardrobe.
So why do we? Why do we, as a society, insist on buying so much so cheaply?
What’s more, are you someone who supports those in the trades while simultaneously engaging in activity that threatens some of them?
Look, I get that not everyone can drop $500 for shoes or $5,000 for suits. I sure can’t, after all, so there’s no way I’d expect anyone else to. In fact, no one has to do any such thing.
However, what they can do is buy the best quality they can find, particularly in a grade that can be repaired and/or altered if needed.
We can start utilizing these tradesmen, hopefully needing them more often than our plumbers or auto mechanics. Not only will we dress better, but we’ll also show more young people there are other ways to go forward in life without spending tens of thousands of dollars to get a college degree that qualifies them for little more than to ask, “Do you want fries with that?”
I’m certainly in agreement with Tom on where the needle should rest on the quality-quantity meter, in that I’ve always preferred to buy higher quality whenever I could afford it rather than cheaper but lower quality items. It’s mostly paid off for me, although others in my family were of the other persuasion, where “more now” was better than “lasts longer”.
In a later post, he quotes Sam Vimes and again, I largely agree:
Despite that, I can buy quality. I may have to pay a bit more upfront, but it’s like the Vimes theory of boots written by Sir Terry Pratchett that’s been talked about here a couple of times:
The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles. But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while a poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet. This was the Captain Samuel Vimes “Boots” theory of socioeconomic unfairness.
So, spend the money on the leather boots and skip having to spend it later.
As a result, though, that’s kind of luxurious.
February 11, 2023
As predicted, HarperCollins’ fit of irrational exuberism has come to an unprofitable end
In the latest SHuSH newsletter, Ken Whyte refers back to HarperCollins and the predicted outcome of taking the one-off sales bonanza of peak pandemic and expecting those numbers to continue once the lockdowns eased:
Book sales spiked during the pandemic and no one enjoyed the ride more than HarperCollins CEO Brian Murray. In June 2021, with his revenue up 19% and his profits up 45 percent, Murray opened the taps:
We are being aggressive in terms of buying books. We’ve seen the book pie grow maybe 15 percent and so our response, which is part opportunist, part defensive, is to be aggressive in buying right now. Because if that pie remains large, we want to make sure that we get a nice share of the larger pie. And if it happens to wane a little bit, we want to make sure that we have a lot of new, exciting books for the future that will maintain our revenues at the current levels. So we’ve been very aggressive over the last six to nine months in trying to sign up the best books that we see in the marketplace.
Murray not only bought more books than usual, he paid more than usual. I read his comments at the time and called my buddy, ECW founder Jack David, who, in his half century in the business, has seen everything. Jack’s response: “Don’t do it!”
Jack and I agreed (see SHuSH 103) that even if Murray acquired a lot of good titles, revenues would disappoint in 2022 and beyond. The publishing pie hadn’t grown. It was temporarily inflated by the unusual and temporary circumstances of the pandemic. Inevitably, life would return to some semblance of normal and aggregate demand for books would revert to the mean. “Twelve months from now,” wrote SHuSH, “Murray will be out of range of 2021’s windfall profits, and perhaps worried about losing money. That’s when the cutting begins.”
We promised at the time to check back to discuss “the great publishing contraction of 2022”.
It’s been eighteen months and the great publishing contraction is now upon us.
Here are the last six months of 2022 according to the Association of American Publishers: July, down 14.9 percent from the previous year; August, down 9 percent; September, down 4.5 percent; October, down 9.3 percent; November, down 6 percent. December should be reported in a week or two. It, too, will be down something.
Another data source is NPD BookScan, which estimates book sales were down 6.5 percent in 2022 compared to 2021.
Give Brian Murray credit for at least being first among his colleagues to react to these new circumstances. He announced last week that he will be cutting 5 percent of his North American work force because the sales surge enjoyed during the pandemic has “slowed significantly as of late.” His note to staff said “we must pause to recognize the depth of the core issues we currently face”. He pointed directly at “unprecedented supply chain and inflationary pressures … increasing paper, manufacturing, labor, and distribution costs”. The company has been raising prices and cutting costs since last fall (so maybe our timing wasn’t off), but “more needs to be done”.
More indeed. Unfortunately. Book sales in 2022 may have been down from 2021 levels but they’re still 11.8 percent above 2019, the pre-pandemic year, suggesting the correction is not finished. Meanwhile, economists say there’s a 70 percent chance of a recession this year. Let’s hope they’re wrong or, at minimum, that any downturn will be shallow and quick.
February 8, 2023
“Smoking has been a net gain for the Treasury ever since King James I started taxing it heavily in the 1600s”
Christopher Snowden asks whether we should believe the consistent claims of public health advocates on how much things they disapprove of (smoking, drinking, etc.) “cost” the taxpayer:
If smoking costs the taxpayers £173 billion, then how much does widespread forced feeding of office pastries cost?
If you say that a certain activity costs society £10 billion a year, most people would assume that if that activity disappears, society will save £10 billion a year.
They might have different ideas of what “society” means. Some will assume that the £10 billion is a cost to taxpayers while others will assume that some of the cost is borne by private individuals and businesses. But the majority will, quite reasonably, assume that the cost is to other people, i.e. those who do not participate in the activity.
And nearly everyone will assume that the £10 billion is money in the conventional sense of cash that can be exchanged for goods and services.
But when it comes to estimates from “public health” campaigners about the cost of drinking/smoking/obesity, all these assumptions would be wrong. Most of the “costs” are to the people engaged in the activity and they are not financial costs. Taxpayers would not pay less tax if they disappeared. In general, they would pay more.
Last month I mentioned an estimate of the “cost” of gambling in the UK and said:
These studies have no merit as economic research. They are purely driven by advocacy. The hope is that the average person will wrongly assume that the costs are to taxpayers and agitate for change.
The main aim of these Big Numbers is to convince the public that heavily-taxed activities place a burden on society that exceeds the tax revenue, thereby justifying yet more taxes and prohibitions.
In the case of smoking, this has become more and more difficult. Smoking has been a net gain for the Treasury ever since King James I started taxing it heavily in the 1600s. Today, as the smoking rate dwindles and tobacco duty rises ever higher, anti-smoking campaigners have got their work cut out duping non-smokers into thinking otherwise.
Tobacco duty brings in about £12 billion a year. For years, groups like Action on Smoking and Health (ASH) used a figure of £13.74 billion as the “cost of smoking”. This came from a flimsy Policy Exchange report which included £5.4 billion as the cost of smoking breaks and £4.8 billion as the cost of lost productivity due to premature mortality. Neither of these are costs to the taxpayer. They are not even external costs, i.e. costs to non-smokers.
Last year, in a review commissioned by the Department of Health, Javed Khan came up with a figure of “around £17 billion” as the “societal cost” of smoking. This included “reduced employment levels” (£5.69 billion) and “reduced wages for smokers” (£6.04 billion). Again, these costs fall on smokers themselves and are not external costs. They are, in other words, none of the government’s business.
Last week, a report commissioned by Action on Smoking and Health (ASH) pulled out all the stops and announced that the cost of smoking to Britain was now — wait for it! — £173 billion. Go big or go home, eh?
February 6, 2023
Food prices going up? Destroying “excess” production? That’s Canada’s Supply Management system working at peak efficiency!
Jon Miltimore reports on recent comments about some of the weird requirements for quota-holding dairy farmers under the Canadian Supply Management system:
Canadian dairy farmer is speaking out after being forced to dump thousands of liters of milk after exceeding the government’s production quota.
In a video shared on TikTok by Travis Huigen, Ontario dairy farmer Jerry Huigen says he’s heartbroken to dump 30,000 liters of milk amid surging dairy prices.
“Right now we are over our quotum, um, it’s regulated by the government and by the DFO (Dairy Farmers of Ontario)”, says Huigen, as he stands beside a machine spewing fresh milk into a drain. “Look at this milk running away. Cause it’s the end of the month. I dump thirty thousand liters of milk, and it breaks my heart.”
Huigen says people ask him why milk prices are so high.
“This here Canadian milk is seven dollars a liter. When I go for my haircut people say, ‘Wow, seven dollars Jerry, for a little bit of milk'”, he says, as he fills a glass of the milk being dumped and drinks. “I say well, you have to go higher up. Cause we have no say anymore, as a dairy farmer on our own farm. They make us dump it.”
[…]
In the United States, the primary regulations are high-level price-fixing, bans on selling unpasteurized milk (which means farmers have to dump their product if dairy processors don’t buy it), and “price gouging” laws that prevent retailers from increasing prices when demand is low, which incentivizes hoarding.
In Canada, the regulations are even worse.
While the price-fixing scheme for milk in the US is incredibly complicated and leaves much to be desired — there’s an old industry adage that says “only five people in the world know how milk is priced in the US and four of them are dead” — in Canada the price is determined by a single bureaucracy: the Canadian Dairy Commission.
The Ottawa-based commission (technically a “Government of Canada Crown Corporation”), which oversees Canada’s entire dairy system (known as Supply Management), raised prices three times in 2022, citing “the rising cost of production”.
Food price inflation remains a serious issue in Canada, but the problem is particularly acute in regards to dairy products, which has seen their annual inflation rate triple over the past year, to almost 12 percent.
If the farmers were doing this sort of price-fixing themselves, it would be illegal. Instead, because it’s the government doing it, it’s mandatory. You aren’t allowed to produce any of the supply-managed products outside the system, and the government helpfully protects Canadians from being “victimized” by cheaper imports by high tariffs on anything competing with supply managed output.
As with any rigged market, the costs of “protecting” the market are diffused among all Canadian consumers, but the benefits are concentrated in the hands of the quota-holders (and the bureaucrats who oversee the system). My issues with the supply management system are one of the “hobby horses” I’ve ridden many times over my nearly 20 years of blogging.
QotD: US railroad land grants
The speech was widely reprinted by those skeptical of government pork barrel (a term that first became popular about the time Knott gave his speech). Sixteen years later, Northern Pacific, which received what was probably the largest land grant to a private company in American history, reprinted the speech in this brochure.
This might seem strange except that NP annotated the speech with recent facts in bright red letters, such as that Duluth had grown to house 26,000 people by 1886, that more wheat was delivered to Duluth each year than to any other American city, and that it also saw deliveries of millions of board feet of lumber and hundreds of thousands of tons of iron ore each year.
NP didn’t say so in so many words, but its point was clearly that the land grants, contrary to Knott’s predictions, were a good thing for most if not all Americans. However, the brochure also didn’t mention that James J. Hill was proving that a railroad that didn’t receive any land grants or subsidies could provide just as many benefits without going bankrupt, which would leave both investors and taxpayers in the lurch. (The St. Paul & Pacific did receive a small land grant, but Hill paid fair market value for that railroad and land after it went bankrupt, thus Hill didn’t particularly benefit from the subsidy.)
Train Lover (Randal O’Toole), “Debate Over Railroad Land Grants”, Streamliner Memories, 2022-11-01.
February 4, 2023
A lobster tale (that does not involve Jordan Peterson)
In the latest Age of Invention newsletter, Anton Howes relates some of his recent research on the Parliament of 1621 (promising much more in future newsletters) and highlights one of the Royal monopolies that came under challenge in the life of that Parliament:
European lobster (Hommarus gammarus)
Photo by Bart Braun via Wikimedia Commons.
One of the great things about the 1621 Parliament, as a historian of invention, is that MPs summoned dozens of patentees before them, to examine whether their patents were “grievances” — illegal and oppressive monopolies that ought to be declared void. Because of these proceedings, along with the back-and-forth of debate between patentees and their enemies, we can learn some fascinating details about particular industries.
Like how 1610s London had a supply of fresh lobsters. The patent in question was acquired in 1616 by one Paul Bassano, who had learned of a Dutch method of keeping lobsters fresh — essentially, to use a custom-made broad-bottomed ship containing a well of seawater, in which the lobsters could be kept alive. Bassano, in his petitions to the House of Commons, made it very clear that he was not the original inventor and had imported the technique. This was exactly the sort of thing that early monopoly patents were supposed to encourage: technological transfer, and not just original invention.
The problem was that the patent didn’t just cover the use of the new technique. It gave Bassano and his partners a monopoly over all imported lobsters too. This was grounded in a kind of industrial policy, whereby blocking the Dutch-caught lobsters would allow Bassano to compete. He noted that Dutch sailors were much hardier and needed fewer provisions than the English, and that capital was available there at interest rates of just 4-5%, so that a return on sales of just 10% allowed for a healthy profit. In England, by comparison, interest rates of about 10% meant that he needed a return on sales of at least 15%, especially given the occasional loss of ships and goods to the capriciousness of the sea — he noted that he had already lost two ships to the rocks.
At the same time, patent monopolies were designed to nurture expertise. Bassano noted that he still needed to rely on the Dutch, who were forced to sell to the English market either through him or by working on his ships. But he had been paying his English sailors higher wages, so that over time the trade would come to be dominated by the English. (This training element was a key reason that most patents tended to be given for 14 or 21 years — the duration of two or three apprenticeships — though Bassano’s was somewhat unusual in that it was to last for a whopping 31.)
But the blocking of competing imports — especially foodstuffs, which were necessaries of life — could be very controversial, especially when done by patent rather than parliamentary statute. Monopolies could lawfully only be given for entirely new industries, as they otherwise infringed on people’s pre-existing practices and trades. Bassano had worked out a way to avoid complaints, however, which was essentially to make a deal with the fishmongers who had previously imported lobsters, taking them into his partnership. He offered them a win-win, which they readily accepted. In fact, the 1616 patent came with the explicit support of the Fishmongers’ Company.
It sounds like it became a large enterprise, and I suspect that it probably did lower the price of lobsters in London, bringing them in regularly and fresh. With a fleet of twenty ships, and otherwise supplementing their catch with those caught by the Dutch, Bassano boasted of how he was able to send a fully laden ship to the city every day (wind-permitting). This stood in stark contrast to the state of things before, when a Dutch ship might have arrived with a fresh catch only every few weeks or months, and when they felt that scarcity would have driven the prices high.
January 31, 2023
“Thorstein Veblen’s famous ‘leisure class’ has evolved into the ‘luxury belief class'”
Rob Henderson had a particularly difficult childhood, but thanks to his own efforts ended up going to Yale after leaving the military. He discovered a very different world when he began his studies:
I was bewildered when I encountered a new social class at Yale four years ago: the luxury belief class. My confusion wasn’t surprising given my unusual background. When I was three years old, my mother was addicted to drugs and my father abandoned us. I grew up in multiple foster homes, was then adopted into a series of broken homes, and then experienced a series of family tragedies. Later, after a few years in the military, I went to Yale on the GI Bill. On campus, I realized that luxury beliefs have become fashionable status symbols. Luxury beliefs are ideas and opinions that confer status on the rich at very little cost, while taking a toll on the lower class.
In the past, people displayed their membership in the upper class with their material accoutrements. But today, luxury goods are more affordable than before. And people are less likely to receive validation for the material items they display. This is a problem for the affluent, who still want to broadcast their high social position. But they have come up with a clever solution. The affluent have decoupled social status from goods, and re-attached it to beliefs.
[…]
You might think that rich students at elite universities would be happy because they are in the top 1% of income earners. But remember, they’re surrounded by other members of the 1%. Their social circle, their Dunbar number, consists of 150 baby millionaires. Jordan Peterson has discussed this phenomenon. Citing figures from his experience teaching at Harvard in the 1990s, Peterson noted that a substantial proportion of Ivy League graduates go on to obtain a net worth of a million dollars or more by age 40. And yet this isn’t enough for them. Not only do top university graduates want to be millionaires-in-the-making, they also want the image of moral righteousness. Elite graduates desire high status not only financially, but morally as well.
For our affluent social strivers, luxury beliefs offer them a new way to gain status.
Thorstein Veblen’s famous “leisure class” has evolved into the “luxury belief class”. Veblen, an economist and sociologist, made his observations about social class in the late nineteenth century. He compiled his observations in his classic work, The Theory of the Leisure Class. A key idea is that because we can’t be certain of the financial standing of other people, a good way to size up their means is to see whether they can afford to waste money on goods and leisure. This explains why status symbols are so often difficult to obtain and costly to purchase. These include goods such as delicate and restrictive clothing, like tuxedos and evening gowns, or expensive and time-consuming hobbies like golf or beagling. Such goods and leisurely activities could only be purchased or performed by those who did not live the life of a manual laborer and could spend time learning something with no practical utility. Veblen even goes so far as to say, “The chief use of servants is the evidence they afford of the master’s ability to pay.” For Veblen, butlers are status symbols, too.
Converging on these sociological observations, the biologist Amotz Zahavi proposed that animals evolve certain displays because they are so costly. The most famous example is the peacock’s tail. Only a healthy bird is capable of growing such plumage while managing to evade predators. This idea might extend to humans, too. More recently, the anthropologist and historian Jared Diamond has suggested that one reason why humans engage in displays such as drinking, smoking, drug use, and other physically costly behaviors, is because they serve as fitness indicators. The message is “I’m so healthy that I can afford to poison my body and continue to function.” Get hammered while playing a round of golf with your butler, and you will be the highest status person around.
January 30, 2023
Eff the WEF | The spiked podcast
spiked
Published 27 Jan 2023Tom Slater, Fraser Myers and Ella Whelan discuss the World Economic Forum, men in women’s prisons and Facebook’s unbanning of Donald Trump. Plus, Timandra Harkness explains the dangers of the UK’s Online Safety Bill.
(more…)
January 29, 2023
“That is what Westerners like about Dubai: the indentured servitude. And the weather.”
Tanya Gold at The Free Press:
“Royal Atlantis Resort hotel under construction, Palm Jumeirah, Dubai” by Jpbowen is licensed under CC BY-SA 4.0 
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I went to Dubai once. It is where tyranny meets hyper-capitalism, and it is as awful as it sounds.
I was helping a journalist friend research an article. I spent my days admiring an undersea bedroom in a lagoon and a ski slope inside a mall. At night I would meet trafficked maids, or a woman imprisoned for adultery. I asked an ancient British tourist why he came here for his holidays. He said, “The staff will hold your dick if you ask them.” That is what Westerners like about Dubai: the indentured servitude. And the weather.
Last week, at the grand opening of Atlantis The Royal, Dubai’s newest luxury hotel, Beyoncé gave her first live performance in five years. This gig featured a 48-person all-female orchestra — how feminist — a Lebanese dance troupe, and her daughter. She was reportedly paid $24 million for the occasion.
Her latest album, Renaissance, is, among other things, an homage to black queer culture. She performed no songs from it; how could she in a country where homosexuality is punishable by death? So she sang her back catalog for the equivalent of ten Bugatti Chirons. Oil-rich tyrannies have generous marketing budgets; they’re selling tyranny itself.
What Beyoncé does or doesn’t do for money wouldn’t matter but for the trend of celebrity activism, which insinuates that morality travels with a star like her wardrobe. Beyoncé acolytes say that just by arriving in Dubai she made the city gayer, a kind of subtle protest. Perhaps so subtle that even Dubai’s ruler Sheikh Mohammed bin Rashid — accused of abducting two of his daughters for noncompliance with his wishes, one from England, and another from a ship as she tried to flee Dubai — wouldn’t notice. Did his enforcers reconsider their stance on gayness as they sang along to “Drunk in Love”? Or are they laughing themselves stupid at the PR coup of persuading an until-now gay ally to perform at the opening of a hotel in a country that hates gays?
Dubai, along with Saudi Arabia, wants to reinvent itself as a tourist destination for when the oil runs out. There is nothing understated there — the Burj Khalifa, which is the tallest building in the world; the Palm Jumeirah, a man-made archipelago in the shape of a palm tree. Everything is vast and highly colored, a distraction. It has to be: To enjoy yourself in Dubai, you must close your eyes to suffering. Almost 90 percent of Dubai’s residents are migrant workers, and many of them live in conditions amounting to indentured slavery.
