In its fight against company tax cuts, [the Australian] Labor [Party] peddles the myth that company tax cuts are a windfall for big businesses and their shareholders, this week even launching ads suggesting [Australian PM] Malcolm Turnbull supports company tax cuts because he’ll personally benefit as an investor.
It’s a myth easily debunked. Think about it. What exactly can a company do with the extra money retained from paying less tax? It can only spend profits in two ways: paying dividends to shareholders or spending more on its operations.
Dividends are subject to tax, including withholding tax for foreign shareholders. Suggesting Turnbull or any other investor will get a windfall is a blatant lie.
In fact, many shareholders will pay more tax to make up the greater difference between the company tax rate and their own tax rate. That’s how dividend imputation works, as Labor well knows.
Alternatively, the company can spend more on things like technology, plant and equipment, funding research and development, expanding its sales force or opening new shopfronts or branches. In other words, more money paid in wages to workers and buying goods and services from suppliers.
All of that spending is also taxed. Workers pay income tax. GST [Goods and Services Tax] is collected on goods and services. Suppliers pay company tax or income tax themselves.
Lower company tax simply allows a business to use more of its money on something productive before the money is collected by government.
Nyunggai Warren Mundine, “Bill Shorten’s Labor would kill the reforms of Hawke and Keating”, Financial Review, 2018-06-26.
July 18, 2018
QotD: Understanding how company profits can be used
July 17, 2018
QotD: The incentive problem for universities
Incentives matter. This is a fundamental tenet of economics: People respond to their incentives. If something in a market seems to be going wrong, it’s because the incentives have gotten screwed up.
Looking at the market for education, it’s hard not to think that there’s something wrong with the incentives. Tuition keeps going up and so does debt. The percentage of people who are not paying off that debt — either because they are in default, deferment, or an income-based repayment program — is staggering. Naturally, a lot of folks would like to get the government in there to start tweaking those incentives until the market stops being so crazy.
One issue involves the incentives that schools have to ensure that their graduates get value out of their degrees. At the moment, a school can enroll you in practically any program, and the government will lend you money for tuition and living expenses, whether or not that degree is likely to produce the means to repay the loan. Since schools are often in a better position to know the economic value of their degrees than naive potential students, that twists the incentives. Eventually, the student will pay, either with money or trashed credit. If the loan defaults, taxpayers will pay too. The school has the most information about the transaction and yet it has the least at stake. No wonder we have such high tuition, so many dubious degree programs and such a troubling rate of default.
Megan McArdle, “Don’t Make Colleges Pay for Student-Loan Defaults”, Bloomberg View, 2016-09-07.
July 16, 2018
QotD: The Great Enrichment
Look at the astonishing improvements in China since 1978 and in India since 1991. Between them, the countries are home to about four out of every 10 humans. Even in the United States, real wages have continued to grow — if slowly — in recent decades, contrary to what you might have heard. Donald Boudreaux, an economist at George Mason University, and others who have looked beyond the superficial have shown that real wages are continuing to rise, thanks largely to major improvements in the quality of goods and services, and to nonwage benefits. Real purchasing power is double what it was in the fondly remembered 1950s — when many American children went to bed hungry.
What, then, caused this Great Enrichment?
Not exploitation of the poor, not investment, not existing institutions, but a mere idea, which the philosopher and economist Adam Smith called “the liberal plan of equality, liberty and justice.” In a word, it was liberalism, in the free-market European sense. Give masses of ordinary people equality before the law and equality of social dignity, and leave them alone, and it turns out that they become extraordinarily creative and energetic.
The liberal idea was spawned by some happy accidents in northwestern Europe from 1517 to 1789 — namely, the four R’s: the Reformation, the Dutch Revolt, the revolutions of England and France, and the proliferation of reading. The four R’s liberated ordinary people, among them the venturing bourgeoisie. The Bourgeois Deal is, briefly, this: In the first act, let me try this or that improvement. I’ll keep the profit, thank you very much, though in the second act those pesky competitors will erode it by entering and disrupting (as Uber has done to the taxi industry). By the third act, after my betterments have spread, they will make you rich.
And they did.
Dierdre N. McCloskey, “The Formula for a Richer World? Equality, Liberty, Justice”, New York Times, 2016-09-02.
July 15, 2018
QotD: “Temporary” government programs
Obamacare will not collapse imminently — or maybe not even ever. But that is not because it is “working” as a public policy. Countries around the world have carried the husk of their far more socialized health-care systems for generations. Rent control, the minimum wage, and countless other economically ridiculous policies endure because they satisfy the political needs of politicians, bureaucrats, and a whole phylum of remora-like rent-seekers. That’s why Milton Friedman said, “Nothing is so permanent as a temporary government program.” He should know, given how it was basically his idea to implement tax-withholding from paychecks as a wartime measure.
You might say that these programs also help real people too. And that is true. But wealth distribution efforts always help someone. And those someones become vested interests who demand perpetuation of the status quo. If the federal government implemented a program to give every left-handed person in the country $20,000 a year free and clear (no doubt to compensate for the fact that such people are witches), you can be sure the Left Handed Association of America would work assiduously to protect their entitlement.
Jonah Goldberg, “The Consequences of Overpromising on Obamacare”, National Review, 2016-10-08.
July 14, 2018
July 13, 2018
QotD: Decline of the mainstream media
What happened to that instinct to go find the story that the “powers that be” wanted buried? Yeah, I know how the Internet has slashed into the paid-advertising model that supported “objective” daily newspapers. But don’t you think the ongoing loss of audience and credibility of the “legacy media” might also have something to do with the fact their little drones now all recite the “Leftist line” in unison — never challenge any of the sacred cows?
That what remains of the American and European “news media” would become captive to the screeching Collectivist/Globalist Left was predictable. First our colleges and now even the government youth propaganda camps (“public high schools”) have been captive to unionized Leftists pushing a thinly disguised Marxist agenda — Franz Fanon, Noam Chomsky and the like — for 45 years now. Public schools which quite purposely turn out graduates who are just barely literate enough to follow their marching orders, by the way, with most of a troublemaker’s innate sense of curiosity long since ground out of them.
(Real research is such a grind. We SO much more prefer the classes where we get good grades for just shouting our opinions about racism and oppression and stuff. And now we even get a free field trip to the state Capitol to shout it out for gun control! … even though we wouldn’t know a muzzle brake from a stripper clip, and couldn’t tell you who wrote the Bill of Rights or why he (or they) believed a citizenry armed with military-grade weapons is somehow “necessary to the security of a free state.” … Or even where that phrase appears.)
With the exception of a few pretty network news readers with great hair, no one ever went into journalism for the money. The sense since Woodward and Bernstein took down Richard Nixon was that journalists had a mission to take down greedy white “deplorable” politicians (and if we can’t find any, we’ll invent some. “If you’re for enforcing the existing immigration laws like every other nation on earth, you’re a racist!”)
The problem is not just a political “leaning.” The problem is that today’s crop of journalists are so incurious it never occurs to them to notice that their assignment editors are taking orders from owners and publishers who are on the same globalist/mind-control team as virtually all of those bought-and-paid-for politicians they’re supposed to be “exposing.” The big corporate guys don’t really care which politicians get taken down, since they’ve bought the “D”s AND the “R”s — they own Chuck Schumer and Nancy Pelosi AND Mitch McConnell and Lindsey Graham and Trey Gowdy. It’s Kabuki, it’s a Punch-and-Judy show to make people feel they’ve got a real choice.
Vin Suprynowicz, “On Reporters Who Ask No (Unapproved) Questions”, Libertarian Enterprise, 2018-06-03.
July 12, 2018
QotD: Bloomberg Syndrome
It is a human trait to focus on cheap lofty rhetoric rather than costly earthy reality. It is a bureaucratic characteristic to rail against the trifling misdemeanor rather than address the often-dangerous felony. And it is political habit to mask one’s own failures by lecturing others on their supposed shortcomings. Ambitious elected officials often manage to do all three.
The result in these hard times is that our elected sheriffs, mayors and governors are loudly weighing in on national and global challenges that are quite often out of their own jurisdiction, while ignoring or failing to solve the very problems that they were elected to address.
Quite simply, the next time your elected local or state official holds a press conference about global warming, the Middle East or the national political climate, expect to experience poor county law enforcement, bad municipal services or regional insolvency.
Victor Davis Hanson, “The Bloomberg Syndrome”, Private Papers, 2011-01-24.
July 11, 2018
QotD: Measuring consumer surplus
Consumer surplus is one of those things which is really, really, difficult to measure. This paper is one of the few that’s able to give us a hard number. But what it is is, really, “how much I would have been willing to pay but didn’t have to?” Say that we’re out and you’re thirsty and I’m not very. You suggest we have a Coke. You’re really interested in this, you’d pay $2 for one, I’m, well, meh, I’d only pay $1 for one. Obviously, the Coke seller (no, not the coke one, that’s different) doesn’t know this so he charges us the same price – $1 each. I’ve gained no consumer surplus I paid a buck for something I value at a buck, you gain $1 of surplus because you would have paid $2 but only paid that buck.
In one manner the consumer surplus is a result of mass manufacturing and marketing. We’re pumping out millions of whatever it is, we’ve got to have a “market price” and some people will value it, whatever it is, at more than that. That greater valuation is that consumer surplus. Without a producer knowing what your individual demand curve is they cannot charge you the full value you ascribe to it.
Of course, they try as hard as they can to do so. This is what brands and product differentiation are all about. VW and car brands for example – there’re SUV models built on roughly the same platform in the Skoda, VW, Audi and Bentley ranges. Oh yes, they’re different cars alright. But perhaps not $300,000 different, which is the price gap between the top and bottom there. Some of this (but please note, only some of this) is because there are people who will pay a fortune to swank around in a Bentley and there are many more who will not, thinking a Skoda is just fine (I do a little work for the company and the new Skoda SUV is indeed very fine but then I would say that, wouldn’t I?). That’s product differentiation.
Another example is what used to happen in old fashioned English pubs – in the public bar and the saloon. The latter had carpets and comfy chairs, the former very definitely not. Beer was 10% more expensive if you wanted the comfy chair experience – very simple and remarkably successful product differentiation. Being able to charge different prices to different groups for much the same thing. Or as it often used to work out, different prices to the same person on different occasions. Dates were in the saloon bar….
Tim Worstall, “Freakonomics’ Steven Levitt On How Inefficient Uber Really Is”, Forbes, 2016-09-20.
July 10, 2018
QotD: Epicurean philosophy
Epicurus was born in 341 B.C., only six years after Plato’s death. He was 18 when Alexander the Great died. This event conventionally separates the classical Greece of independent city-states from the Hellenistic period, when Alexander’s generals and their dynasties ruled vast kingdoms in the former Persian Empire. He set up his school in a Garden in the outskirt of Athens. There is very little that survived from his many books. But fortunately, the work of his Roman disciple Lucretius, who lived in the first century B.C., De Rerum Natura, or On the Nature of Things, was rediscovered in the 15th century.
Through this work, Epicureanism had a major influence on the development of science in the following centuries. Epicurus had borrowed and refined the atomic hypothesis of earlier philosophers, and De Rerum Natura was studied and discussed by most scientists and philosophers of the West. The physics of Epicureanism, which explains that worlds spontaneously emerge from the interaction of millions of tiny particles, still looks amazingly modern. It is the only scientific view coming out of the Ancient World that one can still read today and find relevant.
Those influenced by Epicureanism include Hobbes, Mandeville, Hume, Locke, Smith, and many of the British moralists up to the 19th century. They not only discussed the Atomic theory, but Epicurean ethics, his views on the origin of society, on religion, his evolutionary account of life, and other aspects of his philosophy.
To me, Epicureanism is the closest thing to a libertarian philosophy that you can find in Antiquity. Plato, Aristotle, the Stoics, were all statists to various degrees, glorified political involvement, and devised political programs for their audiences of rich and well-connected aristocrats. Epicurus focused on the individual search for happiness, counselled not to get involved in politics because of the personal trouble it brings, and thought that politics was irrelevant. His school included women and slaves. He had no political program to offer and one can find no concept of collective virtues or order or justice in his teachings. On the contrary, the search for happiness implied that individuals should be as free as possible to plan their lives. To him, as one of his sayings goes “natural justice is a pledge guaranteeing mutual advantage, to prevent one from harming others and to keep oneself from being harmed.”
Martin Masse, “The Epicurean roots of some classical liberal and Misesian concepts“, speaking at the Austrian Scholars Conference, Auburn Alabama, 2005-03-18.
July 9, 2018
QotD: The comforting sound of a cat purring
It seems there’s a woman named Elizabeth von Muggenthaler (wonderful name, so redolent of mad science and gothic castles!) who has discovered that cats purr in a range of acoustic frequencies that are widely known in the medical literature to stimulate tissue healing, especially of bone and connective tissue.
Ms. Muggenthaler does not propose to junk the conventional account that cats purr to express sociability and/or contentment, but she suggests that cats purr as a form of self-healing as well, and has designed various clever experiments that appear to confirm this.
She may also have explained why humans enjoy the sound. Like purring itself, the healing effects of gentle vibrations in those particular frequency ranges have probably been significant in the mammalian line long enough for humans to inherit a mild instinctive tropism for them. I wouldn’t be at all surprised if the human ability to become fond of certain varieties of repetitive mechanical noises has a similar ground.
Eric S. Raymond, “The Hand-Reared Cat”, Armed and Dangerous, 2009-07-01.
July 8, 2018
QotD: Marx on how to run a true communist state
What really clinched this for me was the discussion of Marx’s (lack of) description of how to run a communist state. I’d always heard that Marx was long on condemnations of capitalism and short on blueprints for communism, and the couple of Marx’s works I read in college confirmed he really didn’t talk about that very much. It seemed like a pretty big gap.
[…]
I figured that Marx had just fallen into a similar trap. He’d probably made a few vague plans, like “Oh, decisions will be made by a committee of workers,” and “Property will be held in common and consensus democracy will choose who gets what,” and felt like the rest was just details. That’s the sort of error I could at least sympathize with, despite its horrendous consequences.
But in fact Marx was philosophically opposed, as a matter of principle, to any planning about the structure of communist governments or economies. He would come out and say “It is irresponsible to talk about how communist governments and economies will work.” He believed it was a scientific law, analogous to the laws of physics, that once capitalism was removed, a perfect communist government would form of its own accord. There might be some very light planning, a couple of discussions, but these would just be epiphenomena of the governing historical laws working themselves out. Just as, a dam having been removed, a river will eventually reach the sea somehow, so capitalism having been removed society will eventually reach a perfect state of freedom and cooperation.
Singer blames Hegel. Hegel viewed all human history as the World-Spirit trying to recognize and incarnate itself. As it overcomes its various confusions and false dichotomies, it advances into forms that more completely incarnate the World-Spirit and then moves onto the next problem. Finally, it ends with the World-Spirit completely incarnated – possibly in the form of early 19th century Prussia – and everything is great forever.
Marx famously exports Hegel’s mysticism into a materialistic version where the World-Spirit operates upon class relations rather than the interconnectedness of all things, and where you don’t come out and call it the World-Spirit – but he basically keeps the system intact. So once the World-Spirit resolves the dichotomy between Capitalist and Proletariat, then it can more completely incarnate itself and move on to the next problem. Except that this is the final problem (the proof of this is trivial and is left as exercise for the reader) so the World-Spirit becomes fully incarnate and everything is great forever. And you want to plan for how that should happen? Are you saying you know better than the World-Spirit, Comrade?
I am starting to think I was previously a little too charitable toward Marx. My objections were of the sort “You didn’t really consider the idea of welfare capitalism with a social safety net” or “communist society is very difficult to implement in principle,” whereas they should have looked more like “You are basically just telling us to destroy all of the institutions that sustain human civilization and trust that what is baaaasically a giant planet-sized ghost will make sure everything works out.”
Scott Alexander, “Book Review: Singer on Marx”, Slate Star Codex, 2014-09-13.
July 7, 2018
QotD: Crony rules
The direction [by government] of economic activity thus necessarily involves discrimination between persons, the creation of monopoly and privilege, while the aim of the Rule of Law is the abolition of all privilege, be it in favor of the strong or of the weak. And it is no less fatal to freedom if exemption from general legal rules is granted to the weak than when it is granted to the strong. Once the door is opened to differentiation on the ground of deserts or needs, it will be arbitrary will instead of objective rule which will govern men.
F.A. Hayek, “The Political Ideal of the Rule of Law”, 1955.
July 6, 2018
QotD: “Afflict the comfortable and comfort the afflicted”
And there we have it in a nutshell. “Afflict the comfortable and comfort the afflicted.” That phrase, it should be pointed out, is not what “they” say it’s a journalist’s duty to do. That phrase was satirical, uttered by the fictional Irish bartender “Mr. Dooley,” the 1893 creation of Chicago Evening Post humorist Finley Peter Dunne. It was not intended to be taken seriously. Here’s the phrase in its original context: “Th’ newspaper does ivrything f’r us. It runs th’ polis foorce an’ th’ banks, commands th’ milishy, controls th’ ligislachure, baptizes th’ young, marries th’ foolish, comforts th’ afflicted, afflicts th’ comfortable, buries th’ dead an’ roasts thim aftherward.”
It was a satire of newspapers, not a how-to manual for journalists. Yet that is exactly what Jackman — and, I would wager, the majority of his crusading colleagues — has turned it into. And let’s just ruminate for a moment on what that means. Afflict (“cause pain or suffering to”) the comfortable (“those who are free from worry or pain”). In other words, give pain to those who don’t have it. What a motto, what a career description. Forget the five Ws, forget just telling the truth. Journalists are here to give pain to those they feel are too pain-free. And of course the press takes it upon itself to determine just who is comfortable enough to deserve affliction. Now, make no mistake, in an active situation on the street, the police do, absolutely, wield the power. They have a license to take lives, and they have the muscle of the state behind them. That said, can we really call inner-city beat cops “the comfortable”? Are we talking the Rockefellers here? Are we claiming that your typical parking-ticket scribe is a caviar-eating, yacht-racing, Fabergé-egg-collecting one-percenter?
That’s why those who elect themselves the rainmakers and the pain bringers are so dangerous — we are at the mercy of their judgment regarding who among us needs the misery they have decided they must inflict.
David Cole, “Afflicting the Comfortable”, Taki’s Magazine, 2016-10-06.
July 5, 2018
QotD: Vegetarians
Vegetarians, and their Hezbollah-like splinter-faction, the vegans, are a persistent irritant to any chef worth a damn.
To me, life without veal stock, pork fat, sausage, organ meat, demi-glace, or even stinky cheese is a life not worth living.
Vegetarians are the enemy of everything good and decent in the human spirit, an affront to all I stand for, the pure enjoyment of food. The body, these waterheads imagine, is a temple that should not be polluted by animal protein. It’s healthier, they insist, though every vegetarian waiter I’ve worked with is brought down by any rumor of a cold.
Oh, I’ll accomodate them, I’ll rummage around for something to feed them, for a ‘vegetarian plate’, if called on to do so. Fourteen dollars for a few slices of grilled eggplant and zucchini suits my food cost fine.
Anthony Bourdain, Kitchen Confidential, 2007.
July 4, 2018
QotD: “The world is rich and will become still richer. Quit worrying”
Not all of us are rich yet, of course. A billion or so people on the planet drag along on the equivalent of $3 a day or less. But as recently as 1800, almost everybody did.
The Great Enrichment began in 17th-century Holland. By the 18th century, it had moved to England, Scotland and the American colonies, and now it has spread to much of the rest of the world.
Economists and historians agree on its startling magnitude: By 2010, the average daily income in a wide range of countries, including Japan, the United States, Botswana and Brazil, had soared 1,000 to 3,000 percent over the levels of 1800. People moved from tents and mud huts to split-levels and city condominiums, from waterborne diseases to 80-year life spans, from ignorance to literacy.
You might think the rich have become richer and the poor even poorer. But by the standard of basic comfort in essentials, the poorest people on the planet have gained the most. In places like Ireland, Singapore, Finland and Italy, even people who are relatively poor have adequate food, education, lodging and medical care — none of which their ancestors had. Not remotely.
Inequality of financial wealth goes up and down, but over the long term it has been reduced. Financial inequality was greater in 1800 and 1900 than it is now, as even the French economist Thomas Piketty has acknowledged. By the more important standard of basic comfort in consumption, inequality within and between countries has fallen nearly continuously.
Dierdre N. McCloskey, “The Formula for a Richer World? Equality, Liberty, Justice”, New York Times, 2016-09-02.
