Quotulatiousness

May 4, 2020

Government “problem solving” is an oxymoron

Filed under: Bureaucracy, Economics, Food, Government, USA — Tags: , , , , , , — Nicholas @ 05:00

Antony Davies and James R. Harrigan explain why you should back away quickly when you hear a variant of “We’re from the government and we’re here to help”:

A central theme of our recent book, Cooperation & Coercion, is that all governments are hamstrung when they attempt to fix problems. Policymakers suffer from the knowledge problem: they don’t know enough to foresee every eventuality that will follow from what they do. Politicians see a problem, speak in sweeping statements, then declare what will happen, assuming their edicts will settle matters. But that is always just the beginning. More often than not, all manner of unintended consequences emerge, often making things worse than they were before their policies went into effect.

Consider the United States’ three high-profile wars against common nouns over the past half-century. Lyndon Johnson declared a War on Poverty in the 1960s, Richard Nixon a War on Drugs in the 1970s, and George W. Bush declared a War on Terror in the early 2000s.

How are those wars working out? Because a back-of-the-envelope calculation indicates that we have spent somewhere in the neighborhood of $23 trillion in our attempt to eradicate poverty, drugs, and terror. Not only have we not won any of these wars, it is unclear that any of them can be won. These three so-called wars have managed to saddle future generations of taxpayers with unprecedented debt. And, as is the case with all coercive endeavors, policymakers ask us to imagine how bad things would have been had we not spent the trillions we did spend. And then they ask for even more money. So now we have unwinnable wars along with institutionalized boondoggles to support them.

We see the same sort of thing happening now in the face of the COVID-19 threat that has induced the largest panic attack in world history. In the name of safety, policymakers have shut down myriad productive endeavors. And there will be a raft of unintended consequences to follow. We are already seeing them manifest, and they portend potential disaster as supply chains fail.

The first cracks in US supply chains appeared in the meat industry. Smithfield Foods, reacting to a number of workers contracting the virus, shut down its Sioux Fall plant. Kenneth M. Sullivan, President and CEO, explained in a press release that, “the closure of this facility, combined with a growing list of other protein plants that have shuttered across our industry, is pushing our country perilously close to the edge in terms of our meat supply.” But it’s not just the meat plant that’s implicated. It’s everyone from the cattle farmer to the person who cooks dinner, and there are a number of people who have a place in that process who might first escape attention. The people who make packing materials needed to ship food, the maintenance workers who service machines up and down the supply chain, the truck drivers who move product from one place to another, the grocers who sell the product, the daycare workers who care for the grocers’ children so the grocers can work, and many, many more are all at risk.

[…]

In declaring some jobs “necessary” and others not, in focusing on one supply chain versus another, policymakers show how little they know about the nation’s economy. In their view, they can simply declare things they want to happen, and then those things will happen. But that is not how economies work. An economy is the sum total of everyone’s activities, and when the government declares that something must happen, all kinds of other things happen too.

Consider how all the “non-essential workers” have been sent home for the past two months. Who gets to declare which workers are non-essential to the economy, and by what standard? Most assumed that politicians had the correct answers to these questions. But, as we are discovering, there is no such thing as “non-essential” workers. All workers are essential. How do we know? Because their jobs existed. Profit-driven businesses do not create non-essential jobs. Those people’s jobs were essential to their employers. Further, those people’s jobs were incredibly essential to the people themselves. They need their wages to pay the rent, buy their food, make their car payments, and for everything else that makes their lives livable.

But policymakers simply declared them non-essential, as if there would be no fallout from that decision.

May 3, 2020

The Great Exhibition of 1851

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

In the latest Age of Invention newsletter, Anton Howes looks at one of the biggest popular events of Queen Victoria’s reign, the Great Exhibition:

The Crystal Palace from the northeast during the Great Exhibition of 1851, image from the 1852 book Dickinsons’ comprehensive pictures of the Great Exhibition of 1851
Wikimedia Commons.

On this day, in 1851, Londoners were finally allowed to enter one of the most spectacular edifices to grace their city. Over the previous months they had watched it spring up in Hyde Park — the largest enclosed structure that had ever been built, and made with three hundred thousand of the largest panes of glass ever produced. Set against the blackened, soot-stained buildings of London, the massive glass edifice gleamed. It soon became known as the Crystal Palace.

Although it no longer exists — it was rebuilt in Sydenham, but the new version burnt down in the 1930s — the fame of the Crystal Palace endures. The same goes for the event that it was originally built for, the Great Exhibition of 1851. But, despite that name-recognition, I’ve found that most people don’t really know what the Great Exhibition was for. Yes, it attracted six million visitors in the space of just a few months — an estimated two million people, almost a tenth of the entire population of Great Britain, most of them returning again and again. But why? I must admit, despite having mentioned the event before in some of my work, I’d never really considered it properly before I started researching the history of the Society of Arts.

The idea of such an exhibition in Britain originated with the Society’s secretary in the 1840s, the civil engineer Francis Whishaw. He had seen the use of industrial exhibitions in France, as a means of catching up with Britain in terms of technology. Every few years since 1798, the French government had held an exhibition of its national industries in Paris. The state paid for everything — a grand temporary building, as well as the expenses of the exhibitors — and the head of state himself awarded medals and cash prizes for the bet works on display. Some of the very best exhibitors were even admitted to the Légion d’honneur, France’s highest order of merit. The benefits to exhibitors were so high that essentially every manufacturer wished to take part. In the days before GDP statistics, the exhibitions were thus an effective means of getting a detailed snapshot of the nation’s manufacturing capabilities. An exhibition served as the nation’s industrial audit.

[…]

Although there had been a few local exhibitions of industry in Britain in the late 1830s and early 1840s, there had been nothing on a national scale to rival the French ones. So Francis Whishaw began the work of getting the Society to organise such an event — a national exhibition of industry for Britain. His initial plan came to nothing, partly as he left the Society to take another job, but in the late 1840s the project was resurrected by a new member of the Society, a civil servant named Henry Cole. In fact, Cole almost entirely took over the Society in the late 1840s, turning it into an exhibition-holding organisation. It held exhibitions devoted to particular living artists, on ancient and medieval art, on inventions, and especially on industrial design — what Cole liked to call “art-manufactures”. And, at the 1849 national exhibition in Paris, he adopted an idea that had already been floated for some years by French officials: an international exhibition, to show the industry of all nations.

This was the crucial step. The idea of an international exhibition of industry appealed to the free trade movement in Britain, which had achieved success in the 1840s with the abolition of the Corn Laws. By displaying the products of other nations, the argument went, British consumers would demand that they be able to buy them more cheaply. And free trade would hopefully bring an end to war, too. Free trade campaigners argued that the productive classes of rival nations competed peacefully, simply by trying to outdo one another in the quality and quantity of what they produced. It was the landed aristocracy, they argued, who let the competition become violent, feeding their pride by causing destruction. Thus, a grand exhibition of the products of all nations — the Great Exhibition — would be a physical manifestation of free trade and international harmony: a “competition of arts, and not of arms”.

The Great Exhibition thus had many roles. It was partly born of national paranoia, about French industrial catch-up, as well as about Britain being the first to hold such an event. It was also about exciting competitive emulation between manufacturers, showing consumers what they did not know they wanted, and achieving world peace and free trade. It certainly spurred on dozens of examples of international cooperation. In fact, just the other day I discovered that the first international chess tournament was held in London to coincide with the exhibition. And it served as an audit of the world’s industries, allowing people to judge who was ahead and who was behind. It thereby gave domestic reformers the ammunition to push for changes in areas where Britain seemed to be falling behind, in areas like education, intellectual property, and design. But more on those another time.

May 2, 2020

Drawing some conclusions from our Wuhan Coronavirus experiences

Filed under: China, Economics, Environment, Government, Health — Tags: , , , , , , , — Nicholas @ 03:00

At Catallaxy Files, Justinian the Great provides an expanded list of nine lessons we should learn from our still ongoing Wuhan Coronavirus (aka “Chinese Batflu”, “Kung Flu”, “Bat-biter Bronchitis” and other names our betters insist we not use):

1. Models are not infallible.

When dealing with complex subject matter involving lots of uncertainties, unknowns and data gaps, modelling will almost certainly be wrong. That doesn’t make them worthless but nor does it mean they should be elevated to infallible status and acted upon as though they constitute proof of something.

If we can’t get epidemiological models right involving trajectories of months what is the chance of climate models being correct considering they involve substantially greater uncertainty, unknowns and data problems involving trajectories of decades to centuries?

[…]

2. Experts can get it wrong.

The pandemic has shown that epidemiologists and health experts the world over have got COVID-19 wrong at one stage or another.

The most famous example is the Imperial College model that forecast 2.2m deaths in the United States and over 500,000 deaths in the UK. Critics have argued this was never plausible but it was the catalyst for UK lockdown policy.

[…]

3. Experts can disagree

Experts can disagree and this is normal in science (and policy making).

During the pandemic, health experts across the world have disagreed over epidemiology models (e.g. R0) ranging from thousands of deaths to millions, over treatments (i.e. the efficacy of anti-virals and anti-malarials), over who and how to test (targeted (symptomatic) versus broad based (even antibody testing), how to record cases and fatalities (e.g. Italy counting deaths with COVID the same as due to COVID, Belgium recording deaths suspected to be COVID related but not verified), the origin and nature of the virus (laboratory/synthetic or wet market/natural), over what the public health response should be (full lockdowns, targeted lockdowns, Sweden (minimal) or something in-between), and the susceptibility of children to the virus, leading to divergence on school closures.

[…]

4. The Precautionary Principle – No such thing as a free lunch

The COVID-19 crisis is a classic case of the precautionary principle in action. The policy measures put in place have been justified by the worse case scenarios of epidemic models forecasting mass deaths and hospital systems in collapse. These scenarios have been hyped up by an alarmist media presenting such scenarios / predictions as established fact.

Part of the problem stems from politicians abdicating responsibility for decision-making and hiding behind health experts as human shields. These experts have nothing to gain and everything to lose from underestimating the epidemic. No-one wants to be blamed for hundreds of thousands of preventable deaths.

[…]

5. If you can’t trust the WHO in a pandemic why would you trust the IPCC on climate change?

The neo-liberal (in international relations terms) notion that the UN (and other international institutions) are independent actors working altruistically for the global good has been blown to bits during the COVID-19 pandemic.

The conduct of the WHO and its complicity with China throughout the pandemic has demonstrated what realists have always known, i.e. international institutions are not independent actors, but instead reflect the interests of great powers in the international system.

[…]

6. If you can’t trust the Chinese in a pandemic how can you trust them on climate?

The COVID crisis also demonstrates why should not trust a communist dictatorship to act truthfully, transparently or ethically, much less put global interests above national interests even in times of an international crisis.

If we can’t believe China about infection rates, how can we believe their carbon accounting? If we can’t trust China to reduce the spread of a virus, how can we trust China to reduce the growth in CO2 emissions? If we believe China has captured/corrupted the WHO how do we know it hasn’t captured/corrupted the IPCC? If China will prioritise national interest in a health crisis, why won’t China prioritise national interest in a climate crisis? If we don’t believe China action/excuses in a pandemic why would we believe China action/excuses on climate change? If we can acknowledge China is trying to exploit the health crisis geo-strategically (i.e. South China Sea military manoeuvres) and geo-economically (belt and road and coercive threats), why will it not exploit climate change in the exact same way?

April 29, 2020

“If it saves just one life…”

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

Antony Davies and James R. Harrigan on the rallying cry of the Karens of all genders:

In times of crisis, politicians want to look like they’re doing something, and don’t want to hear about limits on their authority. In times of crisis, people want someone to do something, and don’t want to hear about tradeoffs. This is the breeding ground for grand policies driven by the mantra, “if it saves just one life.” New York Governor Andrew Cuomo invoked the mantra to defend his closure policies. The mantra has echoed across the country from county councils to mayors to school boards to police to clergy as justification for closures, curfews, and enforced social distancing.

Rational people understand this isn’t how the world works. Regardless of whether we acknowledge them, tradeoffs exist. And acknowledging tradeoffs is an important part of constructing sound policy. Unfortunately, even mentioning tradeoffs in a time of crisis brings the accusation that only heartless beasts would balance human lives against dollars. But each one of us balances human lives against dollars, and any number of other things, every day.

Five-thousand Americans die each year from choking on solid food. We could save every one of those lives by mandating that all meals be pureed. Pureed food isn’t appetizing, but if it saves just one life, it must be worth doing. Your chance of dying while driving a car is almost double your chance of dying while driving an SUV. We could save lives by mandating that everyone drive bigger cars. SUVs are more expensive and worse for the environment, but if it saves just one life, it must be worth doing. Heart disease kills almost 650,000 Americans each year. We could reduce the incidence of heart disease by 14 percent by mandating that everyone exercise daily. Many won’t want to exercise every day, but if it saves just one life, it must be worth doing.

Legislating any of these things would be ridiculous, and most sane people know as much. How do we know? Because each of us makes choices like these every day that increase the chances of our dying. We do so because there are limits on what we’re willing to give up to improve our chances of staying alive. Our daily actions prove that none of us believes that “if it saves just one life” is a reasonable basis for making decisions. Yet, when a threat like the coronavirus emerges, we go looking for an imaginary cure that will save lives without tradeoffs.

Feudalism: A Brief Explanation

Filed under: Britain, Economics, Europe, France, Government, History, Religion — Tags: , , , , , — Nicholas @ 02:00

Thersites the Historian
Published 26 Oct 2017

In this video, I try to bring order to the chaos that is feudalism and render it comprehensible.

April 28, 2020

QotD: Rent control in Stockholm

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

Take Sweden, which introduced effective rents controls nationwide in 1947. They were supposed to be a temporary measure, yet they remain in place to this day, despite criticism from academics, think tanks and the OECD. While the intention to create a more socially dynamic society was laudable, the reality has been much bleaker.

Instead of a fairer rental market, where tenants can easily afford rent and live in high-quality housing, Sweden suffers from increased social segregation; eruptions of violence as a result of disagreements in its massive black market of sublet housing; and companies that face immense difficulties in recruiting talent, as potential workers are unable to find suitable accommodation.

Proponents of rent control often emphasise the fairness the measure: rent controls are meant to create a more egalitarian society, where individuals irrespective of their income live in the same neighbourhood and can afford similar quality housing. This could not be further from the truth.

The Swedish experiment shows that it is high-income, well-educated individuals who benefit from rent controls the most, whereas less-educated, or not as well-connected individuals such as younger renters or immigrants, are highly disadvantaged by the system.

In theory, housing stock that becomes available for rent is allocated through the Stockholm Housing Agency, which ensures the rental prices are kept on “an average level”. The average waiting time in Stockholm for such housing allocation is over 11 years. As tenants realise the true value of their contract — e.g. the money they can receive for their apartment on the secondary rental market — they are unwilling to return the property to the agency, even when they move out. Instead, they rent it out to someone in their extended circle of friends or exchange the flat for one in a different area — only in practice, not on paper of course. No wonder that only 0.5% of the housing is returned to the agency, resulting in a massive queue of 670,000 people on Stockholm’s housing waitlist — out of a total population of 970,000.

This system benefits the most well-connected individuals, but highly disadvantages people who lack broad social connections. These groups are often forced into the informal rental market, where the prices are on average double that of the official rent controlled numbers. One in five young Swedish renters face have admitted renting on the black market. Due to the lack of legal arbitration, disagreements between parties can lead to violence and in some cases even murder.

Another problem has been the inflexibility of rental contracts, which have made it difficult for people to move between cities, leading to a fifth of Swedish companies facing severe recruitment problems due to the lack of suitable housing.

Adam Bartha, “Rent controls have failed in cities throughout Europe”, Institute of Economic Affairs, 2020-01-23.

April 27, 2020

The Economy of Ancient Rome

Filed under: Economics, Europe, History — Tags: , , , , , — Nicholas @ 04:00

Economics Explained
Published 26 Apr 2020

Ancient Rome was perhaps the most significant ancient civilisation to have existed throughout history, the empire lived for over 1000 years and in that time, it gave us the foundations for our modern society. Democracy, a court based legal system, Latin languages and alphabet, three course meals, and perhaps it was one of the first modern economies to move beyond a simple agrarian empire and develop things like modern banking, lending, taxation and yes even financial crisis as we know them today.

In the same way that scholars study a dead language like Latin to discerned the foundation of meaning in our modern dialects economists can study the histories of ancient civilisations like Rome to determine basic economic functions in a time before modern financial systems could skew results and Rome was perhaps the most developed case study we could look at.

#rome #economics #recession

Patreon – https://www.patreon.com/EconomicsExpl…

Discord – https://discord.gg/7kM7Tw9

Enquiries – loungejita@gmail.com

References –

Morley, N., 2002. Metropolis and hinterland: the city of Rome and the Italian economy, 200 BC-AD 200. Cambridge University Press.

Temin, P., 2006. “The economy of the early Roman Empire”. Journal of Economic Perspectives

Temin, P., 2017. The Roman market economy. Princeton University Press.

Garnsey, P., Hopkins, K. and Whittaker, C.R. eds., 1983. Trade in the ancient economy

Brown, P., 2012. Through the Eye of a Needle: Wealth, the Fall of Rome, and the Making of Christianity in the West, 350-550 AD. Princeton University Press.

Braund, D.C., 1983. Gabinius, Caesar, and the publicani of Judaea. Klio

Articles

http://penelope.uchicago.edu/Thayer/E…

https://www.rug.nl/ggdc/historicaldev…

https://www.pwc.com.au/publications/a…

April 26, 2020

“If it saves just one life…”

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

Hector Drummond illustrates the moral failure of falling back on the “if it saves just one life” trope as a justification for any and all restrictions on free people:

Not actually the official symbol of Britain’s National Health Services … probably.

Let me ask you a question. Would you give up your job, your savings, your kids’ economic future, your pension, your parents’ current pension, your house, and your mental health, if I told you that doing so may possibly extend my old, sick grandfather’s life by a year or two? I don’t suppose you’d be too keen, would you? In fact, even the most mild-mannered of people is likely to get angry at the sheer effrontery of such a request.

What if I told the world the same thing? What if I told the world that if everyone in every country gave up their wordly possessions, and spent the rest of their lives in grinding poverty, then it’s possible that my grandfather might get to see Christmas? And suppose that there was some bare plausibility to this, based on a computer model developed by scientists at Imperial College. What do you think the world is likely to say to me? The polite response would be, “Sorry to hear about your grandfather, but we’re not going to do this”. The less polite response would be more like … well, just incredulous laughter, and slammed doors.

The reason I bring up these hypothetical scenarios, though, is that all over social media we are hearing about the Covid-19 lockdown being “worth it if it saves just one life”. But would the people saying this really be willing to give up, say, their own house, car and possessions and teenage daughter to someone who is suicidally depressed over their lack of prospects in life? No. Would they be prepared to serve ten years in jail if it saved the life of someone at risk of being killed by gangsters? No. Would they be happy with having the government forcibly remove a kidney from them to extend the life of someone with failing kidneys? No. Economic ruin and loss of liberty is not something we generally regard as a fair trade for a stranger’s life. Generally even the bleeding hearts among us will say, and rightfully so, “I’m sorry for this person, but they are not entitled to this, and I will not damage my life to any great extent for them”. Charitable donations are one thing. So is volunteer service. But that’s it.

Another thing I am seeing is people who say, “Anything is worth it if it saves lives”. Anything? Really? Shall we ban alcohol then? Because some people die from alcohol. Cars? Paracetamol? Steak knives? Shall we ban mobile phones, because terrorists might use them to communicate with? Shall we lock up for life anyone convicted of a minor juvenile crime, in case they turn out to be a killer? The whole idea is too ridiculous for words, yet all over the world there are fearful people hiding in their homes and posting such thoughts. It is one thing to feel sorry for them, but their stupid ideas shouldn’t pass unchallenged.

April 24, 2020

Prizes, patents, and the Society of the Encouragement of Arts, Manufactures and Commerce

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

In the most recent Age of Invention newsletter, Anton Howes explains why the Society of the Encouragement of Arts, Manufactures and Commerce (now the Royal Society of Arts) wasn’t a fan of the British patent system and preferred to award prizes in areas that were unlikely to generate monopoly situations:

The back of the Royal Society of Arts building in London, 25 August 2005.
Photo by C.G.P. Grey (www.CGPGrey.com) via Wikimedia Commons.

… the Society’s early members had an aversion to monopolies, and patents are, after all, temporary monopolies. But there was actually a more practical reason to not give rewards to patented inventions. In fact, quite a few active members of the Society were themselves patentees, and patents for inventions were not generally lumped together for condemnation with practices like forestalling and engrossing. The practical reason for banning patents was that there was no point giving a prize for something that people were already doing anyway. Patents were expensive in the eighteenth century — depending on how you account for inflation, it could cost about £300,000 in modern terms to obtain one — so the fact that there was a patent for a process was a clear indication that it might be profitable. The Society, by contrast, was supposed to encourage things that would not otherwise have been done.

Thus, when a patent had already been granted for a process the Society had been considering giving a premium for, it purposefully backed down — not because the prize would infringe on the patent, but because its encouragement was no longer necessary. And so the effect of the ban on patented inventions was that the Society received, even unsolicited, exactly the kinds of inventions that there was less monetary incentive to invent. Occasionally, this meant trivial improvements — minor tweaks, here and there, to existing processes. An engineer might patent one invention, but not see it worth their time patenting another — through the Society’s prizes, they might at least get a bit of cash for it, or some recognition. The improvement would also be promoted through the Society’s publications. Or, the Society received inventions that were far from trivial, like the scandiscope for cleaning chimneys [here], but which were not all that profitable: inventions that saved lives, or had other beneficial effects on the health and wellbeing of workers and consumers. And finally, the Society received innovations that could not be patented, such as agricultural practices and the opening of new import trades. In the early nineteenth century the Society awarded its prizes to a whole host of naval officers, including an admiral, who came up with flag-based signalling systems between ships — early forms of semaphore.

Another effect of the ban on patents was that the Society also attracted submissions from different demographics. Many of its submissions came from people who were too poor to afford patents, as well as from those who were too rich — wealthy aristocrats for whom commercial considerations might seem vulgar. The poor would generally go for the cash prizes, and the aristocrats for the honorary medals. And the prizes were used by people who might otherwise be socially excluded from invention. In 1758, for example, the Society instructed its members in the American colonies to accept submissions from Native Americans. It also allowed women to claim premiums (just as it allowed them to be members). My favourite example is Ann Williams, postmistress at Gravesend, in Kent, who won twenty guineas from the Society in 1778 for her observations on the feeding and rearing of silk-worms. She kept them in one of the post-office pigeon-holes, referring to them affectionately as “my little family” of “innocent reptiles”. Unlike other elements of society, the Society of Arts accepted, as she put it to them, that “curiosity is inherent to all the daughters of Eve.”

The Society thus encouraged the kinds of inventions that might not otherwise have been created, and catered to the kinds of inventors who might not otherwise have been recognised. Rather than competing with the patent system, it complemented it, filling in the gaps that it left. The Society operated at the margins, and only at the margins, to the better completion of the whole. It found its niche, to the benefit of innovation overall.

April 22, 2020

Can We Build A Space Elevator? | Earth Lab

Filed under: Economics, Science, Space, Technology — Tags: , , , — Nicholas @ 02:00

BBC Earth Lab
Published 5 Aug 2013

Getting to space in a rocket is expensive! One of the most popular alternative ideas is the space elevator, but is it really possible?

Here at BBC Earth Lab we answer all your curious questions about science in the world around you. If there’s a question you have that we haven’t yet answered or an experiment you’d like us to try let us know in the comments on any of our videos and it could be answered by one of our Earth Lab experts.

April 20, 2020

The four distinct phases of the Great Depression in the United States

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

An older post from Lawrence W. Reed at the Foundation for Economic Education outlines the low points of the Great Depression and debunks a few widely held myths about that cataclysmic economic era:

Phase 1, the Federal Reserve and the end of the Roaring 20’s:

One of the most thorough and meticulously documented accounts of the Fed’s inflationary actions prior to 1929 is America’s Great Depression by the late Murray Rothbard. Using a broad measure that includes currency, demand and time deposits, and other ingredients, Rothbard estimated that the Federal Reserve expanded the money supply by more than 60 percent from mid-1921 to mid-1929. The flood of easy money drove interest rates down, pushed the stock market to dizzy heights, and gave birth to the “Roaring Twenties.”

By early 1929, the Federal Reserve was taking the punch away from the party. It choked off the money supply, raised interest rates, and for the next three years presided over a money supply that shrank by 30 percent. This deflation following the inflation wrenched the economy from tremendous boom to colossal bust.

The “smart” money — the Bernard Baruchs and the Joseph Kennedys who watched things like money supply — saw that the party was coming to an end before most other Americans did. Baruch actually began selling stocks and buying bonds and gold as early as 1928; Kennedy did likewise, commenting, “only a fool holds out for the top dollar.”

Phase 2, Hoover’s interventions and the disaster of Smoot-Hawley:

Willis C. Hawley (left) and Reed Smoot in April 1929, shortly before the Smoot–Hawley Tariff Act passed the House of Representatives.
Library of Congress photo via Wikimedia Commons.

Unemployment in 1930 averaged a mildly recessionary 8.9 percent, up from 3.2 percent in 1929. It shot up rapidly until peaking out at more than 25 percent in 1933. Until March 1933, these were the years of President Herbert Hoover — the man that anti-capitalists depict as a champion of noninterventionist, laissez-faire economics.

Did Hoover really subscribe to a “hands off the economy,” free-market philosophy? His opponent in the 1932 election, Franklin Roosevelt, didn’t think so. During the campaign, Roosevelt blasted Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions of people on the dole. He accused the president of “reckless and extravagant” spending, of thinking “that we ought to center control of everything in Washington as rapidly as possible,” and of presiding over “the greatest spending administration in peacetime in all of history.” Roosevelt’s running mate, John Nance Garner, charged that Hoover was “leading the country down the path of socialism.” Contrary to the modern myth about Hoover, Roosevelt and Garner were absolutely right.

The crowning folly of the Hoover administration was the Smoot-Hawley Tariff, passed in June 1930. It came on top of the Fordney-McCumber Tariff of 1922, which had already put American agriculture in a tailspin during the preceding decade. The most protectionist legislation in U.S. history, Smoot-Hawley virtually closed the borders to foreign goods and ignited a vicious international trade war. Professor Barry Poulson notes that not only were 887 tariffs sharply increased, but the act broadened the list of dutiable commodities to 3,218 items as well.

Officials in the administration and in Congress believed that raising trade barriers would force Americans to buy more goods made at home, which would solve the nagging unemployment problem. They ignored an important principle of international commerce: trade is ultimately a two-way street; if foreigners cannot sell their goods here, then they cannot earn the dollars they need to buy here.

Phase 3, FDR and the New Deal:

Top left: The Tennessee Valley Authority, part of the New Deal, being signed into law in 1933.
Top right: FDR (President Franklin Delano Roosevelt) was responsible for the New Deal.
Bottom: A public mural from one of the artists employed by the New Deal’s WPA program.
Wikimedia Commons.

Franklin Delano Roosevelt won the 1932 presidential election in a landslide, collecting 472 electoral votes to just 59 for the incumbent Herbert Hoover. The platform of the Democratic Party whose ticket Roosevelt headed declared, “We believe that a party platform is a covenant with the people to be faithfully kept by the party entrusted with power.” It called for a 25 percent reduction in federal spending, a balanced federal budget, a sound gold currency “to be preserved at all hazards,” the removal of government from areas that belonged more appropriately to private enterprise, and an end to the “extravagance” of Hoover’s farm programs. This is what candidate Roosevelt promised, but it bears no resemblance to what President Roosevelt actually delivered.

In the first year of the New Deal, Roosevelt proposed spending $10 billion while revenues were only $3 billion. Between 1933 and 1936, government expenditures rose by more than 83 percent. Federal debt skyrocketed by 73 percent.

[…] in 1935 the Works Progress Administration came along. It is known today as the very government program that gave rise to the new term, “boondoggle,” because it “produced” a lot more than the 77,000 bridges and 116,000 buildings to which its advocates loved to point as evidence of its efficacy. The stupefying roster of wasteful spending generated by these jobs programs represented a diversion of valuable resources to politically motivated and economically counterproductive purposes.

The American economy was soon relieved of the burden of some of the New Deal’s excesses when the Supreme Court outlawed the NRA in 1935 and the AAA in 1936, earning Roosevelt’s eternal wrath and derision. Recognizing much of what Roosevelt did as unconstitutional, the “nine old men” of the Court also threw out other, more minor acts and programs which hindered recovery.

Phase 4, the Wagner Act:

The stage was set for the 1937–38 collapse with the passage of the National Labor Relations Act in 1935 — better known as the Wagner Act and organized labor’s “Magna Carta.” […] Armed with these sweeping new powers, labor unions went on a militant organizing frenzy. Threats, boycotts, strikes, seizures of plants, and widespread violence pushed productivity down sharply and unemployment up dramatically. Membership in the nation’s labor unions soared; by 1941 there were two and a half times as many Americans in unions as in 1935.

[…]

Higgs draws a close connection between the level of private investment and the course of the American economy in the 1930s. The relentless assaults of the Roosevelt administration — in both word and deed — against business, property, and free enterprise guaranteed that the capital needed to jumpstart the economy was either taxed away or forced into hiding. When Roosevelt took America to war in 1941, he eased up on his antibusiness agenda, but a great deal of the nation’s capital was diverted into the war effort instead of into plant expansion or consumer goods. Not until both Roosevelt and the war were gone did investors feel confident enough to “set in motion the postwar investment boom that powered the economy’s return to sustained prosperity.”

April 16, 2020

Canada’s temporary foreign workers

Filed under: Business, Cancon, Economics, Government, Health — Tags: , , , , — Nicholas @ 03:00

Chris Selley points out some of the weirdness of Canada’s claimed dependence on temporary foreign workers because “Canadians still need to eat.”:

Temporary foreign workers picking fruit in a Canadian orchard.
Image from http://www.yorkfeed.com/apple-picking-urgently-canada/

If all goes as it should at Canada’s airports, temporary foreign workers will be informed of their responsibilities. They should be made aware of their employers’ responsibilities as well. And there’s no particular epidemiological reason to worry about them more than anyone else landing on a Canadian runway from abroad — or domestically, for that matter. The vast majority of temporary foreign workers are from Mexico, Jamaica or Guatemala, which have reported 39, 25 and nine COVID-19 cases per million residents. Canada’s tally works out to 713 per million.

But the official advice to employers provides little comfort. It doesn’t prohibit putting people up in shared accommodations; it merely says residents must be able to keep two metres from each other at all times. We know the limitations of such measures from experience in seniors’ homes and homeless shelters. It’s not necessarily “the state’s duty” to quarantine arriving temporary foreign workers, as Bloc Québécois leader Yves-François Blanchet argued this week. But the state could certainly do far more than it is.

For one thing, the cities in which workers typically first arrive are much better suited to proper self-isolation — i.e., in a hotel or motel room — compared to the farm country they are eventually headed for. Sourcing 45,000 hotel rooms is a huge job even in cities — that’s roughly how many rooms there are in the entire Greater Toronto Area — but it will never be easier than right now. It would prevent any bad-actor employers from breaking the rules. It would be much more reassuring than a government cheque for what works out to less than $80 per worker per day of isolation.

The whole situation is completely bizarre, though — one of several longstanding, bizarre and sometimes embarrassing Canadian situations that COVID-19 has highlighted. Economically speaking, the idea of temporary foreign workers essentially amounts to cheating. It reaches peak absurdity when businesses like Tim Hortons outlets claim to need them — that is, when they’re being brought in to do work that Canadians are demonstrably willing to do. It’s just a skeevy way to artificially depress wages and the price of fast food. People seemed to sense that back in 2014, when the government tightened the rules.

In agriculture, however, the idea seems thoroughly entrenched. Perhaps it’s a case of out of sight, out of mind. But it’s the same absurdity: If you can identify a group of 45,000 people without whose labour we literally wouldn’t be able to feed ourselves — or so we are told — then on what possible grounds are we denying them a path to Canadian citizenship? In 2017, the Toronto Star profiled a 66-year-old Saint Lucian man who had busted his hump on Canadian farms for 37 years in a row, with his paycheques deducted for income tax, EI and CPP, but who had no claim to stay. The highly skilled and educated immigrants we compete to attract bring many important things to Canada’s table; they don’t bring anything more important than food. And food is something COVID-19 has very much taught us not to take for granted. Who would have thought supermarket checkout clerks would achieve hero status?

April 15, 2020

The Industrial Revolution and the Society for the Encouragement of Arts, Manufactures and Commerce

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

In the latest from Anton Howes’ Age of Invention newsletter, we are introduced to the Society for the Encouragement of Arts, Manufactures and Commerce:

The London Sweep (from a Daguerreotype by BEARD).
Image from London labour and the London poor : a cyclopaedia of the condition and earnings of those that will work, those that cannot work, and those that will not work, 1851, via the Wellcome Collection.

When we think of the British Industrial Revolution, the image that springs to mind tends to be of soot-belching factories and foundries, of child labour and squalid cities. The inventors who spring to mind tend to be James Watt and his steam engines, or Richard Arkwright and his cotton-spinning machines. But what people tend to forget is that the Industrial Revolution was unleashed by a much broader tide of accelerating innovation — as I never tire of repeating, it touched everything from agriculture to watchmaking, and everything inbetween. Just as some inventors pioneered the use of factories, other inventors sought solutions to industrialisation’s social ills.

Last time, I mentioned the Society for the Encouragement of Arts, Manufactures and Commerce, set up in 1754 in a London coffee house (the Society of Arts for short). What’s so fascinating about the organisation — which still exists today, now called “Royal” — is that it was closely involved with many of the more socially-oriented innovations of the period. By this, I mean the kinds of inventions that were rarely immediately profitable, but which aimed to save lives, to alleviate suffering, or to remedy some other social ill. The Society advertised premiums — cash prizes or honorary medals — for solutions to the problems that its members identified. And it offered similar rewards, which they called bounties, for unsolicited inventions.

It awarded a bounty of fifty guineas and a gold medal to Henry Greathead, for example, one of the claimants for the invention of the lifeboat. It gave another fifty guineas to a sergeant of the Royal Artillery, John Bell, for a method of firing a rope and grapple by mortar from a ship to the shore, to save people on board from shipwreck during storms. (Some years later, it even gave a gold medal to another inventor for a device that did the opposite, firing from shore to ship.) The Society awarded a medal to a Sheffield schoolmaster, John Hessey Abraham, for a magnetic apparatus that would prevent metal dust getting into the eyes and lungs of workers employed in grinding the points of needles. And in 1767 it awarded a bounty to a clockmaker, Christopher Pinchbeck, for a safer crane — cranes at the time were like gigantic hamster wheels, but for humans. When lines snapped, the results could be fatal, so Pinchbeck added a pneumatic braking mechanism.

The list goes on — in all, over the course of about a century, the Society of Arts awarded over two thousand premiums and bounties for inventions. But there is one that really stands out: a premium for the invention of a mechanical means of cleaning chimneys. With such an invention, the Society hoped to abolish the employment of children, sometimes as young as 4, who were forced to climb up inside chimneys in order to clean them. These children were sometimes abducted by the master chimney sweeps, and frequently perished in horrific accidents or of soot-induced cancers. Strikingly, the use of climbing boys was thought to be unique to Britain — the “peculiar disgrace of England” as the campaigners put it (though I don’t think this was quite true). The Society’s idea was that if a technological replacement could be found, then the case for outright abolition could be made — they wanted to create a machine to take the children’s jobs.

The Society of Arts played its role with the offer of a premium, but it acted alongside another campaign run by a few of its members, who ran the snappily titled “Society for Superseding the Necessity of Climbing Boys, by Encouraging a New Method of Sweeping Chimnies, and for Improving the Condition of Children and Others Employed by Chimney Sweepers”, founded in 1803 at the London Coffee-House on Ludgate Hill. Let’s call it the SSNCB for short. There had been earlier campaigns to abolish the use of climbing boys, one of the most prominent being run by Jonas Hanway (a prominent philanthropist, also a member of the Society of Arts, whose various claims to fame include being the first man in London to sport an umbrella). But the 1803 campaign was to prove the most successful, drawing on wider political support. The SSNCB’s key members included William Wilberforce, who later became famous for his zeal in abolishing the slave trade.

“Experts” and their “models”

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

In the latest Libertarian Enterprise, after offering us his current favourite mixed drink recipe, L. Neil Smith gets around to discussing our modern dependence on “experts” wielding their intricate and convoluted computer models to guide our lives:

My preferred variant of Mott’s Clamato … I’ll have to try it with tequila as Neil suggests.

Start with a tall glass of Mott’s Clamato over ice. Many people can’t stand the idea of tomato juice enhanced with sweet clam juice (and some spices), and I won’t try to sell you on it, here. But if you relish it the way I do (I used to buy it by the gallon), then bon appetit! Throw in a healthy shot of tequila — mine is Cuervo Gold, but your mileage may vary. Add a fat slice of lime on the edge of the glass, a slice of lemon, and a slice of orange. The citrus really dresses it up. These are all ingredients I like very much, and together, they take the edge off a day I spent writing 1000 or 2000 words (my record so far is 3200) and let me relax.

At the end of that day, when my lovely and talented wife quits work and comes home — from the dining room, these days — we have a nice, comfortable cocktail hour (she drinks Cuba Libras) and watch Tucker Carlson. Ordinarily, three giant cans of the Budweiser concoction (which is also made with Clamato) will make me the tiniest bit silly. This drink, the Bloody Mermaid (ick) is surprisingly gentle and I have had two and a half so far without embarrassing myself. I love the taste of tequila neat (many don’t), and I would still be doing shooters, except that my loving bride of 36 years won’t let me eat that much salt.

Please enjoy this silly little drink if you can until we’re all free again.

Oh yeah — I couldn’t resist after all. There’s something I need to get off my chest. I’m sure you remember the way “experts” with computer models warned us all about Y2K, and the way it meant the end of Civilization-As-We-Knew-It. Then there was Global Warming — more experts, more computer models — there are still gullible morons out there who believe it’s not an obvious hoax. Now experts and their — increasingly failing — computer models are all telling us we are in the middle of the worst health crisis since the Black Death.

I happen to be, as you know, a lifelong libertarian and the most fervid advocate of the First Amendment that you will ever read. Therefore, I cannot endorse the suggestion I’ve heard that whenever an “expert” testifies about anything before any legislative body anywhere, and the words “computer model” come out of his mouth, the Sergeant-at-Arms should smash his face in, drag him out into the street, and shoot him him the back of the head. Perhaps millions of lives could be saved that way, but, as a lifelong libertarian and the most fervid advocate of the First Amendment you will ever read, I cannot endorse that position.

So drink up, my dear friends and readers and have the best time — under house arrest — that you possibly can!

When the Fed Does Too Much

Filed under: Economics, Government, History, USA — Tags: , , , , , — Nicholas @ 02:00

Marginal Revolution University
Published 22 Aug 2017

In the 2000s, the Fed kept interest rates low to stimulate aggregate demand. But the cheap credit also helped fuel the housing market bubbles. We’ll look at the case of the Great Recession as an example of where the Fed did too much in one area, and perhaps not enough in others.

« Newer Posts — Older Posts »

Powered by WordPress