When a government is small, it can provide very limited benefits to special interest groups, so there is a small incentive for special interest groups to lobby the government. The successes of those that do lobby the government will cause the government to grow. This occurs because the great majority of voters and taxpayers are rationally ignorant about most government activity, making it easy to increase everybody’s taxes a small amount to provide a sizable benefit to a few. Most people do not have an incentive to investigate in detail the allocation of their tax dollars, but the special interest groups with the sizable benefit will repay the representatives with political support. Thus, special interest groups cause government growth.
The growth of government, in turn, raises the payoff available to special interest groups. With a higher payoff to special interest groups, this encourages the formation of new special interest groups to share in the payoff. A larger government can support a larger number of special interest groups. Thus, as government grows, more special interest groups form. The formation of special interest groups in turn increases the demand for special interest legislation, cause a further growth in government spending.
Randy Holcombe, An Economic Analysis of Democracy, 1985.
August 1, 2019
QotD: Small government provides little scope for special interest lobbying
July 31, 2019
The quickest way to raise the real income of minimum wage earners
Tim Worstall explains how to quickly raise the living standards of everyone in Britain earning the minimum wage, without costing employers any more:
“Palace of Westminster”by michaelhenley is licensed under CC BY-NC-SA 2.0
I – Tim Worstall that is – then started pointing out that the difference between this living wage and the minimum wage was the amount of tax that we – shamefully – charge to the low paid. Tax being both income tax and national insurance contributions. In fact, I rather shouted about it around the place, at the ASI, and here in The Times in 2012.
The gross annual salary of a full-time worker on the minimum wage is £12,070.50. We could come close to lifting every low-paid worker out of poverty if we simply increased the personal tax allowance from £8,105 to that sum. Not a penny of income tax or NICs should leave their pay packet. A full-time worker, however, on the living wage would be taking home £12,410.74, after the taxman has taken a cut — that’s only £340 more. And before the Foundation uprated the living wage yesterday, the annual difference was just £8.74.
There are problems. Raising the personal allowance gives everyone a tax cut — which I’ll admit doesn’t break my heart. But we could lower the amount at which the higher rates of tax kick in to make up for that lost revenue. And won’t these workers lose their right to unemployment benefit and a pension, if they don’t pay NICs? No, they qualify already, as the system treats the very low paid as if they had made NI contributions. We should go farther. The link between the full-year minimum wage and the personal allowance for tax and NI should be made explicit. Change one and the government of the day must change the other. If the minimum wage is the minimum moral amount that someone’s labour is worth, then that is what they should get, not the amount after Denis MacShane’s European wanderings have been paid for.
Which leaves us with two competing visions of how everyone can be free of poverty pay. The Living Wage Campaign’s vision is to shout at every employer in the country until they give in. The Worstall Way is to increase the incomes of the working poor by stopping taxing them.
Federal NDP and Greens duel on climate platforms
Colby Cosh looks at the two most environmentally conscious federal parties’ climate change stances as we head into the next general election:
Federal NDP leader Jagmeet Singh taking part in a Pride Parade in June 2017 (during the leadership campaign).
Photo via Wikimedia.
So why are our most radical, eco-aware parties so easily distracted on this front? Jagmeet Singh’s New Democrats talk tough on climate change in their “Power to Change” plan. It is maximum urgency right out of the gate in the preamble. “People across Canada are worried about the future.” True enough! They usually are! “Flooding and forest fires are threatening our homes.” Well, speak for yourself, but OK. “Polluted air and water are hitting communities hard.” Wait, polluted water…? Wasn’t this supposed to be a climate change thing? “And rising temperatures are threatening our farming and forestry industries.” Oh, good, back on track! “It’s clear there’s no time to waste.”
There is a whole load of radical measures in the NDP program, but they cannot resist this tendency to drag in grace notes of economic nationalism and other subjects at best vaguely related. They promise to “make it easier to own a zero-emission vehicle” in Canada, which might help with the Big Problem, but in mid-sentence they remember that they’re in hock to organized labour and add “and make sure those cars are made in Canada.” This means that if the price of a Tesla comes down to $500 tomorrow, you’ll still have to buy the carbon-neutral modern equivalent of a Bricklin, assuming someone can be found to try building one. Shouldn’t we be willing to buy zero-emission vehicles from Zanzibar or Antarctica if that’s the most efficient way, or the only way, to upgrade the fleet?
The document also smuggles in a promise to eliminate single-use plastic products, which take carbon from the bowels of Mother Earth and… restore it thither in landfills, with the evil molecules usefully imprisoned in polymer chains. We’ll be replacing all that plastic, presumably, with metal cutlery (from mines) and cloth bags (from forests) that have to be washed in hot water if you happen to be particular. There is no hint that this is an incongruous or irrelevant part of a climate-change plan.
So, perhaps a bit of mixed messaging there, as the NDP have to trim their sails in odd ways to keep some of their constituencies in line. How about the Green Party then?
Green Party of Canada leader Elizabeth May with Green candidate Christ Tindal in 2008.
Photo by Shaun Merritt via Wikimedia Commons.
The Green list of climate-change policies is much more radical and earnest in appearance; Elizabeth May’s political liquidators intend to abolish internal-combustion vehicles by 2040 (such dates are no longer sci-fi, oldies) and retrofit every single building in the country for carbon neutrality by 2030.
But what, as the University of Alberta energy economist Andrew Leach asked in a CBC editorial on Monday, is this about “ending all imports of foreign oil”? This autarkic flake out flies in the face of the Greens’ entire approach; some of the oil we produce here is (please imagine me whispering this part) somewhat carbon-intensive relative to the stuff Eastern Canada takes from elsewhere in the world. Moreover, increasing use of domestic oil even in the short term implies a pretty major program of, uh, pipeline-building.
Not to mention the new refineries. The Green Climate Change War Cabinet (a real thing they want) would permit “investment in upgraders to turn Canadian solid bitumen into gas, diesel, propane and other products for the Canadian market, providing jobs in Alberta.” By 2050, they envision shifting “all Canadian bitumen from fuel to feedstock for the petrochemical industry.” This adds up to an awful lot of subsidized high-tech construction — executed at the same time as a total retrofit of the national housing stock! — that has nothing much to do with reducing emissions per se. Although it sounds as though the Greens are, if nothing else, definitely much bigger fans of plastic than the New Democrats.
July 30, 2019
QotD: Business versus economics
Erwin Rommel, edited by B.H. Liddell Hart in The Rommel Papers, 1953.
July 27, 2019
The US Economy is About to Crash Hard | Between 2 Wars | 1929 Part 1 of 3
TimeGhost History
Published on 25 Jul 2019In 1929 it’s been nothing but growth for the US economy for years, at least if you judge by the New York Stock Exchange. But all that glitters is not gold, and when the gilding comes off this bubble it sinks like a lead ballon.
Join us on Patreon: https://www.patreon.com/TimeGhostHistory
Hosted by: Indy Neidell
Written by: Francis van Berkel
Produced and directed by: Spartacus Olsson and Astrid Deinhard
Executive Producers: Bodo Rittenauer, Astrid Deinhard, Indy Neidell, Spartacus Olsson
Creative Producer: Joram Appel
Post Production Director: Wieke Kapteijns
Edited by: Daniel Weiss
Sound Mix by: Iryna DulkaArchive by: Reuters/Screenocean http://www.screenocean.com
A TimeGhost chronological documentary produced by OnLion Entertainment GmbH
From the comments:
TimeGhost History
3 hours ago (edited)
Now… ladies and gents – this is not a video about 2019 and we are not making any political statements. We know that some of you love making parallels between the present day and historical events. Although we can learn from history, try to remember that the circumstances were very different. Others among you feel it appropriate to extend partisan conflicts backwards and make out our videos, or events in the videos as partisan statements or issues. First of all we simply don’t do that, we just relate the events and the circumstances as factually as possible with the best possible sources. Second of all it is pointless to look for the 2019 partisan left/right divide according to party lines in events that happened 90 years ago. There’s just no comparison as both reality, and political parties have gone through so much change that the members of the same party, from today and then would probably disagree so vehemently on so many points the they would not even understand each other. So please, try your best to not go off on partisan rants, as it distracts form the actual historical issues at hand
July 26, 2019
Post-Brexit, consider CANZUK
Tom Colsey explains why in a post-Brexit world, CANZUK might be an attractive economic alternative:
One possible option would mean the island nation would initially turn away from Europe toward certain anglophone Commonwealth nations and former colonies. I talk, of course, of the promising CANZUK proposal that would see Canada, Australia, New Zealand, and the United Kingdom band together with voluntary agreements on multilateral free trade and movement, forming a bloc that would singularly hold the third largest nominal GDP in the world.
The Free Movement Proposal
What makes CANZUK unique is how viable and well-thought-out it is on every level. Unlike within the EU, the grouping would not be consolidated through impositional treaties laced with unpleasant footnotes delegating political power to a bureaucratic institution. Freedom of movement would assist meeting labor market demands across the countries, yet this would be prohibited to those with serious criminal records.
Everything the EU seemed to get wrong about forming unions under a liberal-internationalist pretense, CANZUK proposals seem to get right. They account for social attitudes and the dangers of becoming impositional, eroding national sovereignty. Free movement within the European Union had been widely reviled by the domestic population — and is part of the reason Britain now is set to leave. Yet the very same population overwhelmingly favor the same principle, alternatively implemented, across the CANZUK nations, polling outright majorities in favor in every region.
Perhaps a reason for this is that while the nations are extremely close culturally, they are also resoundingly similar socio-economically. Despite their distances, the states could have been separated at birth (of course, they do share the same monarch).
July 25, 2019
Monetary Policy and the Federal Reserve
Marginal Revolution University
Published on 11 Jul 2017Spider-Man fans likely recall Uncle Ben advising his nephew, Peter Parker, that “With great power, comes great responsibility.”
As it turns out, that sage wisdom is also pretty applicable to the U.S. Federal Reserve System (aka the Fed). The Fed Chairperson, currently Janet Yellen, may not shoot webs out of her wrists, but she and the organization she represents have some super powers over our money supply.
The Fed also has quite a few limitations – monetary policy can only do so much. We’ve previously covered the quantity theory of money and long- and short-run economic growth. If you think back to those videos, you’ll remember that an increase in the money supply (which, in the U.S., is controlled by the Fed) only affects growth in the short-run. Even then, it’s often not smooth sailing.
In this video, we’ll give you an introduction to the function of the Fed as well as some of the problems it faces, and raise the question, “What is money?”
July 24, 2019
“[T]he debt ‘ceiling’ is about as sturdy and solid as those featured on those DIY home reno disaster shows”
Mark Steyn notes that yesterday’s the “big victory” over the debt ceiling (in President Trump’s words) could be almost the same as the “big victory” he wrote about eight years earlier:
The western front of the United States Capitol. The Neoclassical style building is located in Washington, D.C., on top of Capitol Hill at the east end of the National Mall. The Capitol was designated a National Historic Landmark in 1960.
Photo via Wikimedia Commons.
That thoughtful observer of the passing parade, Nancy Pelosi, weighed in on the “debt ceiling” negotiations the other day: “What we’re trying to do is save the world from the Republican budget. We’re trying to save life on this planet as we know it today.”
It’s always good to have things explained in terms we simpletons can understand. After a while, all the stuff about debt-to-GDP ratio and CBO alternative baseline scenarios starts to give you a bit of a headache, so we should be grateful to the House Minority Leader for putting it in layman’s terms: What’s at stake is “life on this planet as we know it today.” So, if right now you’re living anywhere in the general vicinity of this planet, it’s good to know Nancy’s in there pitching for you.
What about life on this planet tomorrow? How’s that look if Nancy gets her way? The Democrat model of governance is to spend four trillion dollars while only collecting two trillion, borrowing the rest from tomorrow. Instead of “printing money,” we’re printing credit cards and preapproving our unborn grandchildren. To facilitate this proposition, Washington created its own form of fantasy accounting: “baseline budgeting,” under which growth-in-government is factored in to federal bookkeeping as a permanent feature of life. As Arthur Herman of the American Enterprise Institute pointed out this week, under present rules, if the government were to announce a spending freeze – that’s to say, no increases, no cuts, everything just stays exactly the same – the Congressional Budget Office would score it as a $9 trillion savings. In real-world terms, there are no “savings,” and there’s certainly no $9 trillion. In fact, there isn’t one thin dime. But nevertheless that’s how it would be measured at the CBO.
Around the world, most folks have to work harder than that to save $9 trillion. That’s roughly the combined GDPs of Japan and Germany. But in America it’s an accounting device. This is something to bear in mind when you’re listening to the amount of “savings” touted by whatever triumphant bipartisan deal is announced at the eleventh hour in Washington.
So I find myself less interested in “life on this planet as we know it today” than in life on this planet as we’re likely to know it tomorrow if Nancy Pelosi and her chums decline to reacquaint themselves with reality. If you kinda dig life on this planet as you know it, ask yourself this: What’s holding the joint up? As the old gag goes, if you owe the bank a thousand dollars, you have a problem; if you owe the bank a million dollars, the bank has a problem. If you owe the banks 15,000,000,000,000 dollars, the planet has a problem. Whatever comparisons one might make with Europe’s soi-disant “PIIGS” re debt per capita or deficit-to-GDP ratio, the sheer hard numbers involved represent a threat to the planet that Portugal or Ireland does not. It also represents a threat to Americans. Three years ago, the first developed nation to hit the skids was Iceland. But, unless you’re Icelandic, who cares? And, if you are Icelandic, you hunker down, readjust to straitened circumstances, and a few years down the line Iceland will still be Iceland and, if that’s your bag, relatively pleasant.
That’s not an option for the U.S. We are chugging a highly toxic cocktail: 21st-century spendaholic government with mid-20th-century assumptions about American power. After the Battle of Saratoga, Adam Smith replied to a pal despondent that the revolting colonials were going to be the ruin of Britain: “There is a great deal of ruin in a nation,” said a sanguine Smith.
July 20, 2019
“Scheer is demonstrating what it actually looks like for a Canadian political leader to be utterly beholden to a special interest group”
I wasn’t a fan of Andrew Scheer even before he bought the leadership of the Conservative party with Quebec dairy money. I think he was one of the worst possible choices for Tory leader, but we’re stuck with his ineffectual bought-and-paid-for self to attempt to beat an incumbent PM who has the undying loyalty of 95% of the mainstream media. And we know beyond a shadow of a doubt that his loyalty isn’t to Canada or to the Tories, but to his paymasters in Big Dairy. Despite this, Chris Selley says that The Milk Dud’s vassalage to a well-moneyed and legally privileged class may end up destroying the government cartel that is Supply Management:
Andrew Scheer, paid tool of Big Dairy, chugs some milk during a Press Gallery speech in 2017. I’ve called him the “Milk Dud” ever since.
Screencapture from a CTV video uploaded to YouTube.
There’s no shame in a conservative politician opposing the federal government of a gigantic country containing multitudes of lifestyles trying to create an ideal diet for all its citizens. “I’ll eat what I want, get out of my kitchen,” is a perfectly respectable position — especially since the food guide is such a joyless, under-salted slog. But that’s not Scheer’s position. Instead he’s vowing to “get it right.” This suggests consulting people other than medical and scientific experts, most of whom were relatively pleased with this edition of the food guide. It suggests bringing industry voices back into the mix. And that’s not something anyone other than Big Dairy and Big Meat should want.
The so-con comparison is somewhat facetious, of course: Abortion is a third-rail issue, or at least the media treats it as such, whereas unwavering protectionist support for our dairy farmers is an all-party consensus-cum-contest to see who can most abase themselves. The winner, by far, is Andrew Scheer. On Wednesday he excoriated the Liberal government for allegedly missing deadlines to explain how it would compensate dairy farmers for ever-so-slightly opening the Canadian market to European and Asian countries.
“(This) mistreatment is unacceptable,” he told the Saskatonian audience. His future government would “never back down from defending the (dairy) sector,” he vowed.
In a strange way, it gives me hope. Surely it’s objectively weird that a man the Liberals are trying to portray as the human embodiment of Canada’s future ruination is so cartoonishly in favour of subsidizing and coddling a given industry, thereby continuing to inflate prices for Canadian consumers, and yet his opponents’ only instinct is to find a way to agree with him. By rights it ought to be the Conservatives who bust up lactosa nostra (copyright CBC’s David Cochrane). But having rebuffed Big Dairy’s dubious dietary advice, the option is entirely open to the Liberals as well. The average Canadian grocery shopper will thank whichever party finally gets it done.
July 16, 2019
Totalitarian Temptations in Free Societies by Ryszard Legutko
Daniel Pipes reviews a recent translation (from Polish) by Teresa Adelson:
Legutko does not claim liberalism resembles communism in its monstrosity, much less that the two ideologies are identical; he fully acknowledges that the first is democratic and the second brutally tyrannical. After recognizing this contrast, however, he gets down to the more pungent topic of what the two have in common.
He first perceived those commonalities in the 1970s when visiting the West, where he saw how its liberals preferred communists to anti-communists; later, with the overthrow of the Soviet Bloc, he watched liberals warmly welcome communists, but not their anti-communist opponents. Why so?
Because, he argues, liberalism shares with communism a powerful faith in rational minds finding solutions which translates into a drive to improve the citizen, modernize him, and mold him into a superior being. Accordingly, both ideologies politicize, and thereby debase, every aspect of life, including sexuality, the family, religion, sports, entertainment, and the arts. (Here’s a mischievous but deadly serious question: which is the more awful art, the communist or the liberal, Stalin’s or the Venice Biennale’s?) [see below]
Both engage in social engineering to create a society whose members are “indistinguishable, in words, thoughts, and deeds ” from one another, aiming for a largely interchangeable population with no dissidents making trouble. Each sublimely assumes its specific vision constitutes the greatest hope for mankind and represents the end of history, the final stage of mankind’s evolution.
Trouble is, such grand schemes for improving mankind inevitably lead to severe disappointment; human beings, it turns out, are far more stubborn and less malleable then dreamers would like. When things go badly (say, food production for communists, unfettered immigration for liberals), two nasty consequences follow.
Here’s a mischievous but deadly serious question:
Which is the more awful "art", #Stalin’s or the Venice Biennale's (@la_Biennale)?
– Both are political kitsch
– But #SocialRealism is for the simple minded & #AvantGardism for the sophisticated
– The one lies, the other perverts pic.twitter.com/mgd1DX1FPF— Daniel Pipes دانيال بايبس (@DanielPipes) July 8, 2019
Bitcoin mining’s massive carbon buttprint
Lincoln Swann explains why Bitcoin has become a huge environmental liability as its per-unit cost-to-mine has risen:
“Bitcoin – from WSJ”by MarkGregory007 is licensed under CC BY-NC-SA 2.0
Bitcoin is more than a rather volatile imitation currency, it is also a huge energy monster.
The digital “mining” to create more Bitcoins and the recording of transactions uses up vast, crazy, amounts of electricity – something like 70TWh a year. That is about the same as Austria, say 20% of UK power consumption. As an added horror much if it is done in China where most of the power is coal generated.
All that adds up to a CO2 output from Bitcoin stuff of about 35mt a year. Planet friendly it definitely aint.
July 10, 2019
QotD: Price controls
Minimum wages, statutory prohibitions on so-called “price gouging,” and other price controls reflect irrational mysticism. These controls are all premised on the notion that by forcibly changing the nominal reported value of a good or service – that is, by forcibly changing the name of the value – the real value of the good or service will change to correspond to the dictated name. It’s a notion no less batty than is the belief, say, that the New York Times can actually change the number of people killed in a terrorist attack by changing the name of the number. Yet who believes that if, say, 18 people are killed in a terrorist attack that the number of dead people will miraculously be reduced by three if the New York Times reports that “15 people were killed in a terrorist attack”? The answer, of course, is no one. Indeed, anyone who would suppose that reality is changed simply when newspaper reports of it are changed is recognized as being too far detached from reality to take seriously.
Those who support price controls are just as detached from reality. The market-determined price of a good or service is as accurate a report as is possible of the value of each unit of a good or service. This value will not move up or down simply if the government orders it to move up or down.
[…]
None of this matters to proponents of price controls. Such proponents are satisfied with the fact that the names of the values of good or services are changed in ways that please the eye and ear of the economically illiterate. If it is now possible to say that the highest name of the value of a gallon of gasoline is $1.00, then these proponents are content to believe that the real value is indeed $1.00. If it is now possible to say that the lowest name of the value of an hour of low-skilled labor is $7.25, then these proponents are content to believe that the real value is indeed $7.25.
It’s a foolish superstition. It is, however, a superstition that is very widespread, especially among those who today fancy themselves to be immune to superstitions.
Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2017-06-19.
July 9, 2019
“Why can’t America have great trains?”
At the very end of his recent book Romance of the Rails, Randal O’Toole regretfully (he really, genuinely is a train fan) answers the question three ways … none of which bolster the hopes that the United States will go back to great passenger railway service:
First, when we had great trains, they were used mainly by the elite, and that remains true of great trains in other countries today. Before 1910, it is likely that a majority of Americans had never traveled more than 50 miles from home, and most had never been on a train, while many others had taken only one or two train trips in their life. As James Hill observed, “the so-called ‘travelling public’ forms in reality but a small, and the more fortunate class of the community.” If he was prejudiced against passenger trains, as some claim, it may have been for altruistic reasons, as the people who relied on freight trains “direct and indirect, include all. Hence justice requires that railway systems … should be cautious not to favor passenger traffic at the necessary expense of freight payers.” It is neither sensible nor fair fo the government to subsidize transportation catering mainly to the wealthy.
Second, new transportation technologies have replaced trains and streetcars. Planes are faster and less expensive for long distances; cars and buses are more convenient and less expensive for short distances; and there is no midrange distance at which passenger rail has an advantage over both cars and planes.
Third, and just as important, other new technologies, including the moving assembly line, telecommunications and the electrical grid, have reshaped our cities so the urban patterns that once made rail convenient to large numbers (though never a majority) of people have been replaced by patterns in which rail makes no sense for passenger travel.
Although we might want great trains in our fantasy of what the world should be like, the reality is we don’t need trains. Most Americans don’t ride the trains we have, nor would they ride them even if they met some arbitrary devinition of “great.” We love passenger trains, and we will remember them in museums and tourist lines. But if the government stays involved in transportation at all, it should be to prepare for the next revolution in transportation, not to try to reverse the previous one.
The main economic damage of Brexit is the extended period of uncertainty
At the Continental Telegraph, Tim Worstall interprets a recent Bank of England recommendation to really mean “do Brexit” and “get it over with”:
“The bank of England. London.”by Demetrio Neri_1959 is licensed under CC BY-NC-SA 2.0
To pull that out of the jargon, when every bugger’s running around screaming because they don’t know what’s going to happen then things are dark for the long term future of the economy. Just because the screaming and the running around means no bugger is doing anything else.
And here’s the thing – that lookin’ dark bit gets worse the longer the uncertainty lasts. To the point that the effect just of the not knowing becomes greater than the possible effect of any particular event in that universe of possibilities. It really is true that continuing to delay Brexit will, at some point, become worse than any particular Brexit outcome.
Thus get on with it, get it done. And given that we’ll get something of a bloody revolution if the Remainers win – we Brits being really quite keen on this democracy idea, we get to choose not they – then the getting on with it will have to be to leave. Yesterday would have been good, tomorrow if that’s not possible.
QotD: Tariffs
Over and above the general point that we don’t want to limit trade nor imports there’s another worry with tariffs and trade wars. Which is what the International Monetary Fund is complaining about. The imposition of more tariffs is a disruption to that global economy. One that is going to reduce growth, the very thing we all desire.
Tim Worstall, “IMF Says The U.S. And China Trade Tariffs Are A Major Risk To World Growth”, Seeking Alpha, 2019-06-07.
