Quotulatiousness

June 23, 2012

Trade deals as mutual disarmament pacts

Filed under: Cancon, Economics, Food — Tags: , , , , , — Nicholas @ 00:27

It’s a very sad commentary that the only way the current “pro-business” federal government can even consider scrapping our supply management monopolies is because “our trading partners forced us to”:

If the government were of a mind to get rid of supply management — it swears it is not — that is perhaps the only basis on which it could: our trading partners made us do it. Certainly it would not dream of doing so otherwise. Such is the power of the supply management lobby, especially dairy, that a suffocating consensus has settled over the issue, of a kind rarely seen in a democracy. Consensus is not even the word. Every party strives to outdo the others in the fulsomeness of its support. And not just every party: every member of every party, in every province and at every level of government. It’s quite creepy.

Yet virtually every economist or policy analyst of note agrees that supply management is a disgrace. The primary effect of the quotas — the intended effect — is to drive up the price of these foods, staples of most Canadians’ diets, to two and three times the market price. The burden of these extraordinary price differentials, of course, fall most heavily on the poor, a fact that ought to trouble self-styled “progressives” but evidently doesn’t.

But it isn’t only consumers who pay. Since the quotas are tradeable, the premium over market prices gets capitalized into the value of the quota. The right to a cow’s worth of milk production, for example, runs to about $28,000, meaning a farmer looking to get into the industry faces an initial outlay, for the typical 60-cow farm, in excess of $1.5-million — just for the quota, never mind the cows, the barn and the rest.

June 19, 2012

EU’s Barroso spurns advice from Canadian “nobody”

Filed under: Cancon, Economics, Europe — Tags: , , , , , , , — Nicholas @ 08:22

The EU is not taking Prime Minister Stephen Harper’s advice gracefully. In fact, they’re not taking it at all:

Maybe it was the 35 C heat here on Mexico’s Baja Peninsula. Maybe it was the pressure of the crisis he faces back home.

Whatever it was, when I asked European Commission president Jose Manuel Barroso here Monday why Canada should risk its financial good name to bail out European banks, Barroso blew a diplomatic gasket.

“We are extremely open and we are engaging our partners but we are certainly not coming here to receive lessons from nobody,” he harrumphed.

That “nobody” is apparently our PM. How dare a mere Canadian politician offer criticism of the European Union, the greatest political achievement of mankind?

In Barroso’s eyes, the fiscal crisis in Europe is not even Europe’s fault. It is the victim in all of this. For that reason, the rest of the world ought bail it out, even though, as Prime Minister Stephen Harper has noted, the so-called euro area of 27 countries is the single largest and wealthiest economic unit in the entire world.

Harper has told Barroso just that, saying that if Canada — or anyone else — is going to kick in to a US$430 billion pool administered by the International Monetary Fund, then Europe is going to have to release the chokehold it has had on the IMF.

And of course, no negotiation with the EU is complete without some hard-to-misunderstand threats from the Eurocrats:

But Barroso wasn’t finished. In the middle of his tirade, he trotted out a thinly veiled threat that a Canada-EU free-trade deal was at risk unless Harper comes to his senses and sends Canadian cash to the continent.

“We are trying to conclude an important agreement on trade with Canada. Why? Because all the other parts of the world look at Europe as a source of possible growth for them. And, in fact, they also have an interest. The sooner the situation is stabilized in Europe, the better for them,” he said.

QotD: The mottos of “High Liberalism”

Filed under: Economics, Government, Liberty, Quotations — Tags: , , , , — Nicholas @ 07:45

The story is, in a few brief mottos to stand for a rich intellectual tradition since the 1880s: Modern life is complicated, and so we need government to regulate. Government can do so well, and will not be regularly corrupted. Since markets fail very frequently the government should step in to fix them. Without a big government we cannot do certain noble things (Hoover Dam, the Interstates, NASA). Antitrust works. Businesses will exploit workers if government regulation and union contracts do not intervene. Unions got us the 40-hour week. Poor people are better off chiefly because of big government and unions. The USA was never laissez faire. Internal improvements were a good idea, and governmental from the start. Profit is not a good guide. Consumers are usually misled. Advertising is bad.

Thus Anderson: “Externalities, asymmetrical information, and other collective action problems are … pervasive in economic life. Countless ways of conducting business reap gains for some while imposing unjust costs on others. Create a cartel. Stuff rat feces in sausages.” Thus Freeman: “It is a truism to say that in order to achieve the benefits of an efficient market economy (increasing productivity, greater economic output, increasing productive capital, etc.), the basic rules of property, contract, and exchange must be structured [by government] to realize efficient market relations.”

No. The master narrative of High Liberalism is mistaken factually. Externalities do not imply that a government can do better. Publicity does better than inspectors in restraining the alleged desire of businesspeople to poison their customers. Efficiency is not the chief merit of a market economy: innovation is. Rules arose in merchant courts and Quaker fixed prices long before governments started enforcing them.

I know such replies will be met with indignation. But think it possible you may be mistaken, and that merely because an historical or economic premise is embedded in front page stories in the New York Times does not make them sound as social science. It seems to me that a political philosophy based on fairy tales about what happened in history or what humans are like is going to be less than useless. It is going to be mischievous.

Dierdre McCloskey, “Factual Free-Market Fairness”, Bleeding Heart Libertarians, 2012-06-16

June 2, 2012

Tim Harford on the basic daftness of “Buy British” policies

Filed under: Britain, Economics, Government — Tags: , , — Nicholas @ 10:35

The same is true for “Buy American”, “Buy Canadian”, or “Buy Australian” programs, too:

The government could at least encourage everyone else to “buy British”.

An intriguing concept. But I don’t understand how this would support the British economy at all. Imagine the whole country collectively agreed not to buy fancy foreign muck unless it was at least 20 per cent cheaper than a comparable British product. Imports would surely take a beating. Assuming the rest of the world simply ignored our silly British ways and did not retaliate, exports would — at first — be unaffected.

Isn’t reducing imports exactly the desired effect?

But such an imbalance of exports and imports would not last. British exporters, flush with the foreign currency they had earned, would seek to spend it, or to find somebody else who wanted it. No one holding pounds would be terribly interested — everyone has, after all, agreed not to buy foreign products unless they are particularly cheap. The only way to get pounds in exchange for dollars, euros and yen would be to offer a premium.

In other words the value of the pound would have to rise.

Of course. And after it had risen a respectable amount, those foreign products would be cheap enough to buy again. Imports would recover. And exports would suffer from the stronger pound. They would and the eventual result would be that we would still buy some foreign products. To the extent that British domestic substitutes flourished, there would be an equal and opposite effect on British export industries.

So there’s no point in a “Buy British” campaign?

You might just as well run a “screw British exporters” campaign.

May 26, 2012

Andrew Coyne on Harper’s real “hidden agenda”

Filed under: Cancon, Economics, Government — Tags: , , , , — Nicholas @ 09:32

We’ve been hearing about Stephen Harper’s “hidden agenda” for nearly a decade and it’s about time for some of it to finally come to light — what’s the point of having a hidden agenda if you never actually implement any of it? Andrew Coyne thinks he’s detected the real thing:

It is becoming more difficult to accuse this government of having a hidden agenda. Not because it hasn’t tried, mind you. But while it remains as obtuse as ever about its intentions, the signs of an agenda are by now unmistakable. Where before it had attitudes, or at best stances, it is beginning to sprout what look remarkably like policies.

To be sure, they are modest, even piecemeal. They are often poorly communicated, where the Conservatives deign to communicate them at all. More often they are simply dropped on the unsuspecting public without consultation, or jammed through Parliament with little debate or scrutiny, quite apart from monstrosities like the omnibus bill.

But put them together and they have all the markings of an agenda:

  • Reform of Old Age Security, not only raising the age of eligibility by two years (starting in 2023, and phased in over six years) but offering higher benefits to those willing to keep working past the standard retirement age.
  • Free trade agreements, now being negotiated with virtually everything that moves: Europe, India, Japan, the Trans-Pacific Partnership, the ASEAN group.
  • Reform of immigration policy, across every category: skilled immigrants, refugees, investors, entrepreneurs, with an emphasis on recruiting immigrants with demonstrable economic prospects.
  • Reform of employment insurance, announced this week, to give repeat users, in particular, fewer excuses to refuse available work.
  • Moreover, the government is at last beginning to implement the Red Wilson report on productivity, four years after it was delivered, with recent reforms opening the door to foreign takeovers in the telecommunications sector (for companies with less than 10% of the market), and raising the threshold asset value for automatic review of foreign takeovers to $1-billion.

May 6, 2012

One of the worst moves African countries can make

Filed under: Africa, Economics — Tags: , , , — Nicholas @ 09:55

Tim Worstall at the Adam Smith Institute blog:

You don’t have to go far into NGO land to find people arguing that poor countries need to protect their baby industries from the big bad wolves of international capitalism. That trade barriers are a good idea, that infant industries need to be nurtured and, as is the way of these things, the Washington Consensus is the imposition of the poverty that the poor suffer from.

That this is entire nonsense does not stop those idiots wearing ideological blinkers from repeating it. Which is something of a pity as it really is trade, openness to it, which drives economic growth:

    In recent years, sub-Saharan African countries have grown remarkably. According to data from the Penn World Table 7.0 (Heston et al. 2011), average annual real GDP per capita growth from 2005-9 has been over 2.5% (3.5% when excluding 2008 and 2009). This recent growth performance is remarkable given that, for over four decades since 1960, real GDP per capita growth in sub-Saharan Africa was dismal, averaging less than 0.5% per annum.

We are, as we know, talking about the poorest of the poor and any uptick in their fortunes has been both extremely difficult to find and extremely welcome when it is.

One thing that might be remembered is that, post-colonialism, most sub-Saharan countries did in fact follow the policies of infant industry protection behind tariff and licencing barriers. It was the falling apart of this in the 80s and then the gradual adoption of good old neoliberalism in the mid to late 90s which has turned the numbers around.

April 16, 2012

Stephen Harper’s “world view is based on the premise that the United States is in relative decline as a superpower”

Filed under: Cancon, Economics, USA — Tags: , , , , — Nicholas @ 09:39

Eugene Lang has an interesting view of how Stephen Harper has changed since coming to power and how this is reflected in Canada’s foreign policies:

Stephen Harper became Prime Minister six years ago with little interest in or experience of international affairs. He was a domestic policy wonk — particularly interested in economic and fiscal affairs. Yet, in about half a decade, he has fashioned the clearest Canadian foreign policy posture in at least a generation, whether you like that posture or not. We can now speak of a Harper Doctrine which forms the cornerstone of our foreign relations.

In a largely ignored interview with Maclean’s magazine last summer, the Prime Minster stated: “We also know, though, the world is becoming more complex, and the ability of our most important allies, and most importantly the United States, to single-handedly shape outcomes and protect our interests, has been diminishing, and so I’m saying we have to be prepared to contribute more, and that is what this government’s been doing.”

These remarks are an important insight into the Prime Minister’s perception of the changes in America’s geopolitical position, and how Canada should respond. They suggest his world view is based on the premise that the United States is in relative decline as a superpower, and that Canada must step up to the plate to help our distressed ally police the world. It is a striking acknowledgement. And it was not just words.

Canada has been needing to diversify its trading relationships to reduce its dependence on, and exposure to, the vagaries of the US economy and the meddling of the US government. President Obama’s recent decision to veto the Keystone XL pipeline is merely the latest spur to get Canada to work more closely with China and other growing economies rather than be subject to presidential whim in our dealings with the US.

During his first half-decade in office Stephen Harper was putting most of Canada’s economic eggs in the American basket, as had his predecessors — from Brian Mulroney to Jean Chrétien to Paul Martin. The Prime Minister was accused of willfully ignoring unprecedented economic opportunities in China.

But that is a thing of the past. Over the last year, the Harper government has embarked on the most ambitious trade and economic diversification agenda in memory. Ottawa is now pursuing free trade agreements with India and the European Union simultaneously. The government has done a 180 on Chinese trade and investment, actively and aggressively pursing both. Canada is trying hard to become a member of the Trans Pacific Partnership, a multi-lateral free trade agreement centred in Asia. And now Canada has begun free trade negotiations with Japan, the world’s third largest economy. Little of this was on Ottawa’s radar screen 18 months ago.

It’s my opinion that the US economy is being held back at least in part because of fears of what the federal government may do — instead of smoothing the worries of business, the government is stoking them and adding to the uncertainties that make business decision-making less bold. The more regulatory changes the government makes (or even hints that it might make), the less investment will be made in areas that might be affected by those changes. The current presidential election campaign with its naked fanning of class warfare isn’t helping the situation either.

Since the global financial crisis, the evidence has mounted that the United States is in economic decline. Its system of government seems congenitally incapable of coming to grips with America’s fiscal crisis. For the first time in living memory, the U.S. recovery from recession has been weaker than Canada’s. The United States continues to have a higher unemployment rate than Canada, virtually unheard of historically. The American economy is amazingly resilient and might yet come back strong, but right now the evidence suggests a long period of relative economic stagnation south of the border. This is the most important structural change affecting Canada since Stephen Harper became Prime Minister.

April 13, 2012

“Brzezinski[‘s] … realpolitik approach … is actually refreshing in today’s age of flippant air-bombing humanitarianism”

Filed under: Books, Economics, Government, History, Military, USA — Tags: , , , , , — Nicholas @ 08:24

Sean Collins reviews a pair of books that — rather than signing on to the idea of America as terminal-phase western Roman Empire — perhaps go too far in the other direction. The books are The World America Made by Robert Kagan and Strategic Vision: America and the Crisis of Global Power by Zbigniew Brzezinski:

It is clear that the US faces a number of challenges, especially with regard to its stagnant economy and gridlocked politics. But more and more, the country’s specific problems are overshadowed by creeping fears of national decline. This backdrop of decline extends beyond domestic economics to contemplating whether America’s influence in the world is diminishing, in particular relative to emerging powers like China.

[. . .]

Brzezinski is not only old, he’s old-school, too. His realpolitik approach, which includes Cold War concepts like containment, is actually refreshing in today’s age of flippant air-bombing humanitarianism. For example, he quite baldly comes out and calls for the US to lead an effort to expand the West (via NATO and the EU) to include Russia and Turkey. This, he says, is necessary to prevent Russia from striking out on its own, or allying with China. Brzezinski is also still very mindful that great-power politics have not disappeared, and could re-emerge more forcefully. More than once, he speculates that Asia today resembles Europe before the twentieth-century world wars, and argues for care to ensure that a new conflagration does not break out.

The two authors’ respective approaches to American relations with China illuminate their differences in approach. Kagan is blunt, arguing for an antagonistic stance. He calls on the US to ‘press for greater democratic and liberal reforms’ in China (and in other authoritarian nations), and to promote free trade and markets, and thus ‘push back’ against state capitalism in China. In contrast, Brzezinski urges a diplomatic approach, one that attempts to reach mutual agreement while preventing China from becoming a too-dominant regional power. He is opposed to the Obama administration’s recent ‘Asia pivot’, which calls for more US troops in the region. In an interview with Edward Luce in the Financial Times, Brzezinski warned: ‘We have to focus on Asia, but not in a manner that plays on everyone’s anxieties… It becomes very easy to demonise China and they will demonise us in return. Is that what we want?’

[. . .]

This is illustrated by their treatments of the recent wars in Iraq and Afghanistan. On the surface, the two seem to take very different lines. Kagan was bullish at the outset of both wars and, consistent with his general style in the book, he quickly skates right past such awkward issues. Brzezinski, in contrast, is damning, highlighting how the wars have undermined America’s ability to project its power. But the fact is that neither author really spends much time thinking about them. This is telling: both prefer to speculate about the future rather than face up to the reality of recent foreign-policy moves. Oddly, neither author examines either President George W Bush’s record or President Obama’s record. When Brzezinski does address the Bush administration’s foreign policy, his analytics go out the window and he just sneers. We are left believing that the interventions in Iraq and Afghanistan were nothing more than purely subjective mistakes made by Bush and his vice-president, Dick Cheney.

April 4, 2012

The “Three Amigos” are not all that friendly at the moment

Filed under: Americas, Cancon, USA — Tags: , , , , , — Nicholas @ 10:56

A report on the “Three Amigos” meeting where President Barack Obama hosted President Felipe Calderon, and Prime Minister Stephen Harper at the White House:

Obama’s neglect of our nearest neighbors and biggest trade partners has created deteriorating relations, a sign of a president who’s out of touch with reality. Problems are emerging that aren’t being reported.

Fortunately, the Canadian and Mexican press told the real story. Canada’s National Post quoted former Canadian diplomat Colin Robertson as saying the North American Free Trade Agreement and the three-nation alliance it has fostered since 1994 have been so neglected they’re “on life support.”

Energy has become a searing rift between the U.S. and Canada and threatens to leave the U.S. without its top energy supplier.

The Winnipeg Free Press reported that Canadian Prime Minister Stephen Harper warned Obama the U.S. will have to pay market prices for its Canadian oil after Obama’s de facto veto of the Keystone XL pipeline. Canada is preparing to sell its oil to China.

Until now, NAFTA had shielded the U.S. from having to pay global prices for Canadian oil. That’s about to change.

Canada has also all but gone public about something trade watchers have known for a long time: that the U.S. has blocked Canada’s entry to the eight-way free trade agreement known as the Trans-Pacific Partnership, an alliance of the U.S., Australia, New Zealand, Vietnam, Malaysia, Peru, Chile, and Singapore. Both Canada and Mexico want to join and would benefit immensely.

So much for Canadian whingeing, right? Those snowback hosers are never happy. Relations with Mexico must be in better shape, yes? Uh, no:

Things were even worse, if you read the Mexican press accounts of the meeting.

Excelsior of Mexico City reported that President Felipe Calderon bitterly brought up Operation Fast and Furious, a U.S. government operation that permitted Mexican drug cartels to smuggle thousands of weapons into drug-war-torn Mexico. This blunder has wrought mayhem on Mexico and cost thousands of lives.

It’s fortunate for President Obama that the press is generally careful in their reporting … careful, that is, to avoid blaming Obama wherever possible.

Update: Ace has more on the unusually assertive Canadian position.

April 3, 2012

Eliminating inter-provincial barriers to trade

Filed under: Cancon, Economics, Law, Liberty, Wine — Tags: , , , , — Nicholas @ 10:43

Confederation in 1867 was supposed to create a single nation out of a group of separate British colonies in North America. In spite of that, in some areas, individual provinces treat one another as foreign entities for trading purposes. Alcohol, for example, is one product that gets special treatment for inter-provincial sales — almost always to interfere with or even prevent the purchase of alcohol in one province for consumption in another. 680News reports on the latest effort to harmonize the rules regarding alcohol sales across provincial borders:

Free my grapes will be the rallying cry on Parliament Hill on Tuesday as a committee hears from supporters of a private member’s bill seeking to erase a 1928 rule that restricts individuals from bringing wine across provincial borders.

Shirley-Ann George ran into that problem when she was visiting B.C. and then tried to join a wine club through a vineyard there, only to be told the vineyard couldn’t ship to her home in Ontario.

She decided to start up the Alliance of Canadian Wine Consumers to try to change it.

“You’ve got to be kidding,” is the most common refrain from people first learning about the rule, George said.

“Most Canadians don’t even know it is illegal. They think it’s silly, archaic and it’s time that the government started to think in the 21st century.”

Of course, the provinces are not keen to allow individuals to buy wine directly — that might threaten their respective monopolies (and the juicy profits they derive from being “the only game in town”). One of their current arguments against the bill is that it will somehow give Canadian wines an unfair advantage and that could cause issues with our international trade partners. I’m not sure how it benefits Canadian wineries to be shut out of selling to Canadian wine drinkers in other provinces, but I’m sure that they have some cockamamie statistical “proof” that they’ll trot out to bolster their argument.

February 24, 2012

Prohibition-era restrictions finally coming down: Making it legal to cross provincial boundaries with wine

Filed under: Bureaucracy, Cancon, Law, Liberty, Wine — Tags: , , , , — Nicholas @ 00:06

Of course, it’s only a private member’s bill, so there’s only a tiny chance that it will be enacted:

I recently spent four days in Kelowna, B.C. during the Canadian Culinary Championships, then another subsequent two days at home in Toronto, tasting B.C. reds. There are many intriguing and excellent new labels on the market. […] The vast majority however are not available on the shelves of the LCBO’s Vintages stores; and the prices of some that are available for order via local agents are bloated by 50% to 100% over retail in B.C., thanks to LCBO mark-ups.

Before you say ‘so what’s the point’ and click away, hear my tale. Their availability may improve dramatically before this year is out, and you may be able to access them at something closer to B.C. prices. Our archaic interprovincial wine shipping system is seeing its first official crack.

In the Air Canada departure lounge at Kelowna Airport I spent a few minutes talking to Ron Canaan, MP for Kelowna-Lake Country. He, along with MP Dan Albas of Okanagan-Coquihalla, have been championing a private members bill (C-311) that would make it legal for individuals to carry or import wines across provincial borders (which has been technically illegal since Prohibition almost 90 years ago). A website called freemygrapes.ca has the full story.

The bill passed Second Reading in the House of Commons in the last session, and Mr. Canaan is “confident” it will pass third reading and become law this year. He is hoping in early summer.

February 10, 2012

This is why the “patriarchy” is an unlikely culprit

Filed under: Britain, Economics, Liberty — Tags: , , , , , — Nicholas @ 11:27

Henry Hill explains the key market mechanism that would undermine “the patriarchy”:

Let’s imagine we have ten businesses competing for the same market. If we are spectacularly ungenerous to the male sex (as to get into Harriet Harman’s brain we must surely be) let’s assume that nine of those businesses are run by real, conviction sexists who consciously exclude capable women on the grounds that they’re women. This leaves a vast talent pool available to the tenth business, which presumably can lap up these highly capable workers. If sexism was depressing their wages as well, then this business would have a significant competitive advantage over the competition.

How long would rival businesses really keep deliberately hiring inferior labour at inflated prices out of allegiance to the principle of sexism? It would only take one company in a competitive market to break the ranks of chauvinist solidarity for such arbitrary and costly employment practises to be rendered totally unaffordable.

There are all kinds of reasons for differing employment patterns between men and women, including different priorities, working hours, child-rearing and so forth that have firm bases in business sense. To ascribe these differences to an omnipresent, more-important-that-profit sexist conspiracy, one must believe the entire spectrum of business subscribes to the exclusion of women at the expense of their own industrial and economic interests. That they literally looked at the ‘profits’ David Cameron is waving in front of them and decided that, if the cost was employing women, £40bn wasn’t for them.

February 9, 2012

Paul Wells: Harper’s trip to China is going well

Filed under: Cancon, China, Economics, Media — Tags: , , , — Nicholas @ 11:22

In his Maclean’s column, Paul “Inkless” Wells talks about the state of play in prime minister Stephen Harper’s visit to China:

The old-timers in the press gallery know how to defuse an announcement like this. We dust a toolkit from the early Chrétien days off. A Canadian prime minister shows up in a fancy Beijing ballroom with a bunch of business executives wielding Montblanc pens. A big number is being tossed around — say, “$3 billion.” But if we subtract the deals that would have happened anyway, and then subtract the deals that aren’t really deals — then we can wear that number down to some innocuous nub.

But while individual elements of Stephen Harper’s signing ceremony Thursday night in a fancy Beijing ballroom may not pan out, at some point the weight of evidence starts to suggest something real is going on. The evidence at hand comes, not just from Canadian sources, but from Chinese.

The first source of the morning was the semi-official English-language China Daily, which reserves real excitement for vice-premier Xi Jingping’s upcoming trip to the United States but which has been respectful, and a little more than that, toward Stephen Harper all week.

Later in the day came Harper’s bilateral meeting with Hu Jintao. Here, no trace of scolding for time spent posturing in the early years of Harper’s term as prime minister. Now, Hu said, “Mr. Prime Minister, you put a lot of value on Canada’s relationship with China and are strongly committed to promoting the practical cooperation between our two countries. I appreciate your efforts.” Translation: You’re out of the doghouse. Come here, ya big lug.

Update: David Akin contrasts the glowing reviews Harper is getting in the Chinese press this time with his 2009 visit:

I’ve travelled to a lot of spots around the world covering Prime Minister Stephen Harper’s international travels and I cannot recall him ever generating the kind of positive press he’s getting in this morning’s China Daily, the English-language state-run daily newspaper here.

A picture of Harper chatting with Chinese chess players during a visit Wednesday to the Temple of Heaven is the front-page top-of-the-fold main art here with a generally positive article about the two countries improving trade relationship. Inside, there’s two other pieces involving Canada and Harper.

[. . .]

Read between the lines here and China’s government is approvingly showing Canada’s prime minister to be a decent, pious individual deserving of China’s friendship and support.

That’s a sharp contrast to the China Daily‘s coverage of Harper’s 2009 visit. There was front-page coverage then too — of how Premier Wen dressed down Harper for letting the China-Canada relationship languish. The narrative in 2009 was that the Canadian prime minister was a wayward supplicant coming to China to seek forgiveness for his sins. Not this time: He is being profiled in the press as the leader “of a strong delegation of five ministers and 40 business leaders” who, along with Wen, witnessd “the signing of nine deals.” The reader of the China Daily on this Harper visit is meant to be impressed.

February 3, 2012

New economic ideas on employment and stimulus

Filed under: Economics, Government — Tags: , , , — Nicholas @ 10:03

Arnold Kling, writing in the Wall Street Journal, explains why (if his new theories are validated) governments have been doing exactly the wrong things to help the economy recover:

… I believe that the process of creating employment is explained not by the theories of Keynes, but rather by the theories of Adam Smith and David Ricardo. Smith famously described the advantages of specialization and division of labor. Ricardo pointed out the gains from trade that come from consuming goods that others produce more efficiently. From the perspective of Smith and Ricardo, real jobs emerge in the context of patterns of sustainable specialization and trade.

Unfortunately, the patterns of specialization and trade that had emerged five years ago were not sustainable. Many jobs in home construction, durable-goods manufacturing and distribution, and mortgage finance were dependent on housing markets with ever-rising prices. In the U.S. and the U.K. in particular, the finance industry expanded well beyond its true economic value. Once the property bubbles burst, these jobs were exposed as not viable. Meanwhile, ongoing creative destruction brought about by the Internet and globalization have continued to allow substitution of capital and emerging-market labor for industrialized countries’ labor in many sectors. Together, these phenomena have caused widespread dislocation.

More government spending will not bring back the days when supposedly triple-A-rated mortgage securities could be fashioned out of dodgy loans to unqualified borrowers. Doing so would not halt the ongoing improvements in productivity in manufacturing and retail trade. It would not facilitate the adjustments that are needed in the mix of skills in the labor force. The necessary adjustments can only be made by the decentralized efforts of entrepreneurs.

[. . .]

The word “sustainable” in “patterns of sustainable specialization and trade” refers to profitability. Patterns that are profitable can be sustained. Patterns that are not profitable must eventually be shut down. That is the problem with patterns of trade created by government borrowing and spending: They are not sustainable, as has been illustrated in the U.S. by the failure of many of the “green energy” companies supported by President Obama’s stimulus package. Moreover, as European policy makers have discovered, there are limits to how much governments can borrow to fund their experimentations in specialization and trade.

February 1, 2012

The wonders of selection, or why it now takes you an hour to find “just the right item” at the store

Filed under: Economics, Liberty — Tags: , , , — Nicholas @ 11:59

Monty (who just joined Twitter) linked to a Reason article on the glories of choice we have available to us in the western world. Monty’s comment:

The glories of capitalism, as expressed in the salty-snacks aisle of the supermarket. When you have a surfeit of a good or service, the value-add stops being the utility-value of the good and instead becomes esthetics or status. That’s why rich people drive Rolls Royces and Ferraris instead of Toyotas and Fords. As cars, they all do pretty much the same thing and in pretty much the same way; but the value-add of a Ferrari lies in aspects not directly related to the utility value of the vehicle. You can say the same about nearly any other commodity class, from clothes to electronics…to snack foods.

And the A Barton Hinkle article he links to:

But you don’t have to research the past 50 years of product flops to make the case. Just check a vending machine. There you will find every possible combination and interpolation of snack food. In the potato chip category alone — we don’t have time to look at crackers, cheese puffs, corn chips, or cookies — one finds not just barbecue- or cheddar-flavored chips, but chili cheese, cool ranch, ragin’ ranch, habanero, cheddar jalapeno, hot sauce, honey cheese, creamy chipotle, Mediterranean herb, and ketchup-flavored chips.

It’s obvious what’s going on here. Like every other industry, America’s snack-food makers live in deathly fear that the other guys are going to come up with the next “disruptive innovation” first, so everyone is trying to innovate as fast as they can. The poor sots in middle management have been told next year’s raise depends on producing X amount of revenue from new products. But there are only so many truly new products you can think up. Answer? Combine existing products the way you choose from a Chinese take-out menu: one from Column A, one from Column B. …

This seems to be the method at Hammacher Schlemmer — the fine folks who bring you must-have products like the bath mat/alarm clock and the remote-control pillow. It seems to work for them. So why not try it with snack food? Pickle-flavored potato chips, that’s why. Who needs all that ridiculous junk? Your basic potato-flavored potato chip was good enough for our ancestors and by gad sir, it should be good enough for us.

Or at least this is my attitude when standing before a vending machine. Whisk me into an office-supply store, however, and the tune suddenly changes. I am among those who have a weak spot — call it a fetish, call it an obsession — for school supplies. Pens, especially.

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