Quotulatiousness

November 7, 2026

Ludwig Erhard’s shock treatment of the postwar German economy

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

On the social media site formerly known as Twitter, Handre points to the state of the German economy after World War 2 and what it took to shock it back to life:

Germany did it before. The question worth asking now, with Europe’s largest economy grinding through its third consecutive year of stagnation, is whether Germany can summon the nerve to do it again.

In 1948, Ludwig Erhard did something that struck most of his contemporaries as insane. He abolished price controls overnight, slashed rationing, and replaced the worthless Reichsmark with the Deutschmark at a brutal conversion rate. The occupying Allied authorities were furious. Labor unions called a general strike. Erhard told the critics to wait two weeks.

They waited. Industrial output jumped 50 percent within months. By 1950, real wages were rising and the black market, which had functioned as the actual German economy under Allied price controls, simply evaporated. Prices fell as production caught up with demand. Consumer goods reappeared on shelves for the first time in a decade.

In a sound monetary environment, rising productivity drops prices and you get richer in real terms without a central bank engineering 2 percent annual inflation to pick your pocket. The Deutschmark held its value. Savings meant something. Capital formation exploded because businessmen could actually calculate future costs without guessing what the currency would be worth next year.

Germany’s neighbors ran the opposite experiment, keeping controls and soft money, and watched their recoveries crawl.

The 2026 German government faces energy costs triple their 2019 levels, a manufacturing sector hollowing out, and a central bank it no longer controls. Erhard’s playbook sits on the shelf. Cut the regulatory burden, restore price signals, stop the spending. This is not complicated; the political will is the only scarce resource.

November 2, 2026

High-trust minority populations have huge advantages in low-trust communities

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

But on the flip side, those advantages can raise resentment against the minority if their social and economic position improves too obviously against that of the communities they inhabit. Lorenzo Warby finishes his short series of essays on the Marxist labels of “capitalism” and “capitalist”:

For another example of what dreadful terms capitalism and capitalist are, consider market-dominant minorities such as overseas Chinese (particularly Hakka), overseas Indians (particularly Gujaratis), overseas Lebanese (particularly Maronites), Jews, Igbos, the Sogdian diaspora … These are groups with strong internal trust and reputation networks that give them strong information — and so coordinating, anticipation and risk-management — advantages over people in the wider society. This is especially true in low-trust societies. Such market-dominant minorities have advantages in engaging in commerce and in creating and using capital.

Capital is not magical. It does not spontaneously arise or get used well. It has to be created and applied. Not only that, it is very clear that groups and polities vary greatly in their capacity to create and use capital. It is that — highly variable — creation and use that is crucial.

Capital has to be coordinated; it has to be used in service of sufficiently correct anticipation of commercial and other conditions; there has to be risk management. These things are all information and feedback questions.

Market-dominant minorities are so because of their advantages in information and feedback — including how they use that information and feedback. (If I wanted to summarise problems with contemporary Western democracies in a single phrase, it would be broken feedbacks.)

It turns out, that their human and social capital and their culture — that is, their norms, skills, outlooks and connections — are the real advantages of market-dominant minorities. None of these features are mere products of capital; not even those that count as capital.

Nor is this capital that you can just add from outside. They cannot be readily incorporated into some arithmetic function of labour and capital (such as a Cobb-Douglas production function). Since these features are so much about human agency, and information and normative landscapes, it is a open question whether calling human and social capital forms of capital is, in itself, misleading.

Part of the problem for market-dominant minorities is precisely that their use of information is “invisible” to outsiders. (It is also invisible to Marxist Theory.) It is thus easy to accuse them of “cheating”, of being “social parasites”.

As history shows again and again, convince a group of Homo sapiens that that group over there are parasites — and that you and yours would be better off without them — and one has set the scene for massacre, for mass murder. A principle that the entire history of Revolutionary Marxism, of Communism, displays even more vividly: every single Marxist mass murder was legitimated by the parasites charge. This is why the labour theory of value is a primer for mass murder.

Communism has been so murderous because it labels entire classes as parasites. Nazism was so murderous because it labelled entire races as parasites—indeed, also as toxic, exploitive parasites—and created a realm of destroyed states that stripped people of the protections of citizenship: regions where Nazi race extermination was more deadly to the population than even Stalinism. In both cases, creating the golden future required eliminating the human blocks to the same.

In the case of market-dominant minorities, the very interior clannishness that gives them information, reputation and feedback—so trust—advantages can also lead to genuinely exploitive behaviour towards outsiders. Periodic massacres and expulsions of market-dominant minorities is a pattern going back many centuries, across states and civilisations. (China provides some dramatic examples, while Chinese diasporas have also been victims of such.)

Over the centuries, various market-dominant minorities have instantiated some version of this meme.

Those strong internal connections within market-dominant minorities can be very much a two-edged sword. Whatever role capital plays in all this, it is very much derivative of the underlying dynamics of human action: especially of information and normative landscapes.

November 1, 2026

Why Do Shortline Railroads Exist? | Railroad Economics 19

Filed under: Business, Economics, Railways, USA — Tags: — Nicholas @ 02:00

Railroad Economics
Published 14 Jul 2026

Every day, thousands of freight cars are delivered by railroads you’ve probably never heard of. These smaller companies, known as shortline railroads, play a critical role in the North American freight network by serving customers that the major Class I railroads often can’t do efficiently.

In this episode of Railroad Economics, we explore why shortline railroads exist, how they make money, what they haul, and why the largest railroads depend on them to complete the “last mile” of freight service. From industrial switching to local customer service, these small railroads are an essential part of the railroad business.

If you’ve ever wondered why there are so many different railroad names on freight trains, this video explains the economics behind it.

October 27, 2026

QotD: The outer “zones” surrounding a typical pre-modern city

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

Diagram of von Thünen’s model from The Isolated State, after Morley (1996), 62. The agriculture ring is subdivided by intensity (intensive, long-lay and three-field), but here I have merged them for simplicity. The agriculture zone is wider because it did, in fact, tend to cover a larger area. The fade in the pastoralism zone is meant to indicate shifts from ranching to transhumance.

Once out of the innermost zone of very high intensity usage, we reach the middle zones of von Thünen’s model, which are devoted primarily to agriculture, falling in degrees of intensity as we move away from the city. This is where you should expect to see rolling seas of wheat and barley, as well as large scale cultivation of things like olives and grapes, as the climate permits. This seems to be what, for instance, Tolkien has in mind when he describes the Pelennor as fair and fertile townlands running down to the Anduin.

(I should note this this zone is subdivided into three groups: intensive agriculture, long-lay agriculture and three-field agriculture. We might discuss those terms further if future posts bring us to discussing how pre-modern farms work, but for now, I don’t want to get too – pardon the pun – deep in the weeds.)

Now, I noted before that for small cities, the horticultural zone might be entirely contained inside the city walls. The reverse is true as well – the larger the city, the further out these zones can get pushed – and this is especially true of the middle zone. As it extends, it tends to create miniature population centers within it (villages) – usually along roads (we’ll get to them).

But for very large cities, the area of grain cultivation can be truly massive. As I’ve noted in an earlier post, a city of around 500,000 would need to pull cereal production from an area of arable land close to the size of the state of Massachusetts. Rome – at nearly a million – imported grain from up and down the entire Italian coast, North Africa and even Egypt. A middle zone that large could contain not merely villages, but other towns and even large cities, whose own land-use patterns would be substantially distorted by the “pull” of the mega-city at the center. […] as a rule of thumb, if the cereal cultivation zone extends more than 20 miles out from the center, you should expect to see smaller market towns within it (because people want a market within a day’s walk).

What does this kind of zone look like? That actually depends a lot on terrain – expect villages surrounded by fields on areas of good, arable land. In a fairly wet environment (like Northern Europe), those villages might radiate out from the city. In arid environments like Egypt or Mesopotamia, the farmland (and thus the peasant population) is densely concentrated along the rivers, because water availability becomes a strong determinant of arability.

One thing Americans specifically tend to get a bit off here is that the farms are not likely to be evenly spaced over the terrain. We are very used to the agricultural landscape created by things like the Homestead Acts (1862-1930), which offered very large chunks of land (often as many as 640 acres) for purchase, creating a lot of very spaced out farms. Peasant agriculture in the pre-modern period doesn’t tend to organize like this.

Instead, peasant agriculture tends to cluster in villages, with fields radiating out from the villages (which in turn, often have their own micro-garden zone and local forests for wood). Part of the reason for this is that farmland within the village is typically not held as big, standalone farmsteads. Instead, it is either held communally, or else each family owns several small plots spread over different ecological zones (the better to be protected from the risk of a year being wet or dry or cold or whatever – if you have a little land everywhere, then probably something will grow somewhere every year. I’ll talk more about subsistence survival strategies in a future post).

In some societies, these peasant villages may also be mixed in with large elite-held (often slave worked) estates, but there’s an important caveat here. The grand estates – like Roman villas and latifundia – generally do not completely displace the local peasantry (in part because they rely on that peasantry to supply surplus labor). The role of the “big man” and these sorts of large market-oriented estates is complex and worth its own post. But in terms of land-use patterns, such estates generally exist within a landscape of smaller farmers, not in a vast sea of other large estates.

The outermost zone in the model is dedicated to pastoralism (“ranching” technically, but I’d like to be a bit more broad). Pastoralism can take the form of enclosed ranching, but can also be mobile in various ways. I won’t describe ranching too much – this human terrain is still much in evidence and well documented. But mobile forms of pastoralism are more foreign, I suspect, to most of my readers. Transhumance – the moving of livestock between seasonal summer and winter pastures (often up the mountain in summer and down the mountain in winter, for instance – this is “vertical” transhumance) is a common form of limited pastoral mobility.

Transhumant pastoralists do tend to have permanent homes at one end of the route (typically the lower winter pastures for vertical transhumance). These may cluster in villages and are likely to plug into the infrastructure network spreading out from the city. I bring this up mostly because this is how you do get the “rolling hills of empty grassland” terrain so common in depictions of fantasy cities: these areas aren’t empty at all, but merely transhumant pastures not currently in use.

(Side note: This fact about pastoralism is especially worth noting: pastures which are regrowing in the “off” season often might look empty and unused to an outsider, but trespassing on such grounds can bring lethal retaliation. Because these pastures are not unused, but in fact engaged in the vital task of regrowing to support the herd in the following season. This is also the case for true nomads as well, by the by. The reason, of course, is that if those pastures are not grown when the herds are migrated back, the pastoralist’s entire pattern of subsistence is disrupted, endangering his survival. This is a not infrequent cause of friction between pastoralists and agricultural peoples who neighbor each other).

Pastoralism exists on the outer edge of the model for two reasons. First, it is very low density. While the goods it produces (wool, milk, meat) are important, it produces them at a very low density. Agriculture can support massively greater population densities than pastoralism, so high population density tends to push the pastoralists out. There’s a political/military dimension to this as well: the concerns of the farmers tend to dominate political thinking in the city (where, you will recall, the political and military elite are), and the farmer’s greater population density tends to allow them to “push” the pastoralists further from the city and onto marginal lands – either economically (buy the land) or militarily (fight the pastoralists and shove them off).

Second, pastoralism has very low transportation costs. This is because the goods produced by pastoralists can, by and large, walk themselves to market. This is called transporting them “on the hoof”, a phrase my students continue to find funny and are surprised to learn is a real term. Major cattle and animal markets are often still located within city centers, but a shepherd can simply walk his animals to market for sale. That greatly reduces transportation costs, which also tends to push pastoralism out to the edges of the economic network.

Bret Devereaux, “Collections: The Lonely City, Part I: The Ideal City”, A Collection of Unmitigated Pedantry, 2019-07-12.

September 8, 2026

We should stop using the terms “capitalism” and “capitalist”

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

On his Substack, Lorenzo Warby returns to the issue of how we describe the (theoretical) predominant economic system by which the west has risen to wealth and power using terms coined by the man who hated it more than any other:

Title page of Das Kapital in the first German edition of Volume 1.
Wikimedia Commons.

It would be a great improvement to our understanding of social dynamics if people stopped using the terms capitalism and capitalist. Given how ubiquitous these terms are, this may seem a strong claim, but it is one that is easy to sustain.

The Marxist definition of capitalism is:

According to Wikipedia:

    Capitalism is an economic system based on the private ownership of the means of production and its use for the purpose of obtaining profit.

The first problem is the ism. There is no role for the state here. The state becomes, implicitly or explicitly, a “reflection” of the economic system, despite the fact that people do not describe non-state societies as “capitalist” even though such societies can have lots of private ownership used for the purposes of gaining income.

Non-state societies cannot manage the scale of economic activity so as to have, for example, firms. Their economic production is overwhelmingly centred on households.

Sedentism — living in dwellings — created households that then became, for millennia, the centre of most economic activity. Even states were governed out of royal or imperial households. It is factories, and offices, that move economic activity out of households.

The mass energy-use take-off we call the Industrial Revolution has brought the arc of economic history that began with sedentism to an end. When economist Robin Hanson writes about the shift from farmer “back” to forager patterns, it is the effects of the supplanting of households from the centre of economic activity that he is pointing to (without fully grasping that).

Note that this shift away from households being central to economic activity is very much about energy use: it applies to both commerce and to state activity (including state production). It is not inherently “capitalist”.

State production also produces commodities: calling such “state capitalism” just shows how much capitalism is a ridiculously protean term.

Eliding the state

The exclusion of the state in defining capitalism is not analytically benign. A classic and continuing use of the term capitalism is to romanticise the state. By viewing the state as a “reflection” of the economic system, all bad things, all disliked features, can be based on the malign influence of “capitalists”, of the dynamics of “capitalism”, with the state reduced to an instrument or reflection of such dynamics. (The same thing can be done in reverse, blaming all bad things on the state — see anarcho-capitalism — but that is much less common.)

The natural — and used — implication of blaming private commerce for all bad things is that, if good people, with good intentions, and proper understanding, run the state, it can do anything needed for their program to be achieved. This is very obvious if one, for example, reads the program of the Democratic Socialists of America.

The term capitalism thereby becomes a vehicle for getting the state profoundly wrong; for not understanding that the state is a fundamental structuring feature of any state society; for not understanding that, across history, states have been the dominant extractor and creator of surplus, and so of class structures. That, when it comes to state societies, the state itself is fundamental.

August 15, 2026

Money isn’t an invention of the state

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

The invention of money has happened many, many times in many different societies. It’s an essential element to moving beyond subsistence and crude barter, because having a stable medium of exchange allows far more sophisticated economic activities. It addressed the real needs of people and it worked:

The state didn’t invent money. Carl Menger destroyed that myth in 1871 with his regression theorem, and statists have been seething ever since.

Picture yourself in a primitive barter economy. You’re a blacksmith who needs grain, but the farmer doesn’t want your horseshoes. He wants pottery. The potter wants leather goods. The leather worker wants meat. You face what economists call the double coincidence of wants problem: finding someone who both has what you want and wants what you have. Barter works for simple trades, but complex economic coordination becomes impossible.

Smart traders notice that certain goods get accepted more readily than others. Cattle, salt, shells, precious metals. These commodities share specific properties: durability, divisibility, portability, recognizability. Over generations, market participants gravitate toward the most marketable goods as media of exchange. No central authority decrees this. No committee meets to decide monetary policy. Individual actors pursuing their own interests spontaneously converge on the same solution.

Money emerges from voluntary exchange, not government decree. Every unit of money traces its value back through an unbroken chain of exchanges to its original commodity value. Gold became money because people valued it first as jewelry, ornamentation, and industrial uses. Its monetary premium built on top of that foundation. When governments later monopolized monetary systems, they parasitically appropriated this organic market institution.

You can observe this process today in Venezuela, Zimbabwe, Lebanon. When state currencies collapse, people don’t wait for permission to adopt alternatives. They trade cigarettes, rice, Bitcoin. Markets route around monetary failure because human cooperation demands a medium of exchange.

July 28, 2026

QotD: Projecting the effect of a maximum wage law

Filed under: Britain, Economics, Government, Quotations — Tags: , , , — Nicholas @ 01:00

What would be the impact of such a policy?

We cannot know exactly, because we would struggle to find a real-world example of it in a comparable country. But we could think of it as, effectively, a 100% marginal tax rate on incomes above £100,000. We could then look at the empirical literature on how responsive top earners are to tax incentives, and extrapolate from that.

We know from previous studies that the behaviour of top earners is quite sensitive to tax changes. Last year, the Institute for Fiscal Studies (IFS) tried to model the impact of a proposal to increase the tax burden on the top 5% of earners. In this case, the proposal was to lower the threshold for the 45% additional rate of income tax from £150,000 to £80,000 per annum, and to introduce an “additional additional rate” of 50% for incomes above £125,000.

If nobody changed their behaviour, such a policy would increase tax revenue by just over £9 billion per annum. But people would, of course, change their behaviour. Some top earners would switch to less demanding positions, some would retire earlier, some would reduce working hours, some would engage in more proactive tax planning (i.e. legal tax avoidance), some would simply emigrate, and so on.

We know for certain that responses of that kind exist. But we cannot exactly quantify them. So the IFS came up with a range of plausible outcomes rather than one definite number. It turns out that at the most optimistic end of the spectrum, behavioural changes would still knock over a third off the potential additional tax revenue, reducing it from over £9 billion to under £6 billion. At the most pessimistic end of the spectrum, the policy would fail to raise any additional tax revenue – it would, in fact, reduce revenue by almost £1 billion. (Stop smirking, Dr Laffer.)

If a tax rate of 50% can be predicted to trigger such strong behavioural responses, you can guess how much damage an implicit rate of 100% would do.

Kristian Niemietz, “The public love it, so what’s wrong with the idea of a maximum wage?”, Institute of Economic Affairs, 2020-10-14.

July 18, 2026

Jevons and Baumol, and why they matter now

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

On the social media site formerly known as Twitter, Matt Ridley talks about the ideas of William Stanley Jevons and William Jack Baumol, whose ideas have become far more important over the last few decades:

English mystery novelist Agatha Christie (1890-1976) at Schiphol Airport in Amsterdam on 17 September, 1964.
Photo by Joop van Bilsen for Anefo via Wikimedia Commons.

Agatha Christie once remarked that she had never expected to grow rich enough to own a car or poor enough not to have servants.

The reason this strikes us as bizarre today boils down to two names that you hear invoked a lot in the tech industry: Jevons and Baumol. One is shorthand for the expansion of products or professions with rising efficiency, the other for the shrinkage of products or professions with stagnant efficiency.

There’s a pleasing chronological symmetry between these twin ideas: William Stanley Jevons coined the Jevons paradox in 1865; William Jack Baumol described Baumol’s cost disease exactly a century later in 1965.

… For every industry that experiences efficiency gains, there’s another that does not. And this latter industry inevitably becomes less affordable. Baumol’s first example was string quartets: violinists are no more productive but you have to pay them more to prevent them running off to become software engineers. The productive industries drive up the labour costs in the rest of the economy.

Marc Andreessen jokes that if a hole appears in the wall of your house in California these days it is probably cheaper to glue a flat-screen television over it than hire a builder to repair it: a Jevons-deflated cost beats a Baumol-inflated one.

The big question of our age is can AI drag Baumol-shaded industries back into the sunlight of Jevons? Can it make things like healthcare, education, or government switch from rising costs to falling costs?

I fear not in the case of government because of a bureaucratic version of the Jevons and Baumol effects. As Cyril Northcote Parkinson put it in an article in the Economist in 1955: “Politicians and taxpayers have assumed (with occasional phases of doubt) that a rising total in the number of civil servants must reflect a growing volume of work to be done. Cynics, in questioning this belief, have imagined that the multiplication of officials must have left some of them idle or all of them able to work for shorter hours. But this is a matter in which faith and doubt seem equally misplaced.”

Since 1997, the British public sector has seen zero increase in productivity. That is to say, the average civil servant generates about the same output today as he did three decades ago.

Think about this for a second. Thirty years ago fax machines were high-tech, the internet was in its infancy, emails were new, Wi-Fi was scarce, mobile phones were voice-only. How is it remotely possible to be no more productive today than then?

We know the answer. Each email is now copied to a dozen people, each report is pasted and copied till it is twice as long, each Zoom call has five times as many attendees, each mobile call is followed up by three times as many WhatsApp messages – and each day at the desk is interrupted by a training session on transgender anticolonial sustainability. That’s a sort of Jevons-Baumol effect: a Jevol?

June 5, 2026

The Canadian economy, RIP

Filed under: Cancon, Economics, Government, Media, Politics — Tags: , , , , , , — Nicholas @ 04:00

On the social media site formerly known as Twitter, James E. Thorne writes an obituary for the Canadian economy:

For the record.

In Canada, It Matters How the Economy Dies.

The Canadian economy is dead. It just didn’t die with a crash big enough to satisfy the models. No Lehman moment, no Covid-style cliff, just two negative quarters of GDP, years of falling output per person, negative productivity, and a private sector slowly strangled by rates and regulation while the establishment insists the patient is “resting”.

On the facts, this isn’t ambiguous. Real GDP has contracted for two consecutive quarters on an annualized basis. Labour productivity has been flat or negative since 2021. Real GDP per capita is below its pre-pandemic level. Ontario has logged its worst non-pandemic quarterly job losses since the mid-1970s. The only consistent growth is in government payrolls and compliance, not in private enterprise and investment. If that isn’t recessionary, the word is meaningless.

And yes Macklem threatens rate hikes through all of this insanity.

Yet Canada’s official guardians insist nothing fundamental has broken. The C.D. Howe recession-dating committee says the downturn is not “pronounced, persistent, and pervasive” enough. The central bank warns against overreacting to “technical” weakness. Bay Street talks about “soft landings” and “resilience”. In some quarters, the answer to this slow-motion collapse is not relief, but further rate hikes. Ignore the body on the table, we are told, the vital signs aren’t quite bad enough yet to fill out the certificate.

Their rulebook was built for heart attacks, not cancers. It excels at spotting sudden collapses in aggregate GDP and jobs. It barely registers slow organ failure: a few tenths off real GDP per capita each year, productivity edging down, ugly quarters for private-sector employment and capex offset by public hiring. None of that triggers the old alarms until the damage is permanent.

Meanwhile, Canada has been busy throwing away the advantages that once justified its prosperity. Energy and resource projects are stalled or strangled. Business investment per worker trails peers. A country rich in capital, talent, and geography behaves as if it can live forever off inherited endowments while making it harder to build anything new. That is not “resilience”. It is delusion.

Canada’s economic establishment needs to wake up.

Two negative quarters of GDP, negative productivity, falling GDP per person, historic job losses in the core province, a suffocated private sector and calls for more tightening on top, are not signs of an economy “cooling toward trend”. They are signs of an economy that has already crossed the line from stagnation into decay.

The Canadian economy is dead in the way that matters: as an engine of rising living standards and a place where private capital is rewarded for building the future. It just didn’t die loudly enough for the old definitions. The real question now is not what we call it, but how long our institutions will keep pretending the corpse is “resilient”.

As the propagandists of the mainstream media do everything they can to deflect any hint of blame from their Liberal paymasters, we can still see that things are getting worse, not better:

The federal Liberals are getting fantastic return on their investment … giving our money to the presstitutes of the legacy media in return for kid-glove treatment of the government and attack-dog tactics against the opposition:

Why Do 50% Still Support Carney? My long-winded response.

That is a question we need to take seriously.

Leger’s latest federal polling has the Liberals at 50% support among decided voters, their highest level in that firm’s tracking since the Liberals first formed government in 2015. Abacus also found the political environment still favourable for Carney and the Liberal government. So this is not imaginary. This is not just CBC fairy dust sprinkled over Ottawa. The support is real. The harder question is whether it is rational.

My answer is simple: many Canadians are not voting for results. They are voting for the illusion of relief.

Even though Carney was in the economic background since 2020 he appeared to arrive after the Trudeau years like a man in a clean suit walking into a room after the dog crapped on the floor. Trump threatened 51st State. Carney looked calm. Unlike Trudeau. He spoke in complete sentences. He had the central banker aura. For exhausted voters, that was enough. They did not examine the wiring. They just saw someone who did not seem to be setting the curtains on fire.

Carney’s appeal is not built mainly on performance. It is built on contrast. Compared with Trudeau’s theatre-kid government of slogans, selfies, and moral lectures, Carney looks serious. But “serious” is not the same as right. A surgeon can look serious while operating on the wrong leg.

Canada’s economy is now weak enough that Carney himself has had to acknowledge ugly economic data. Reuters reported him addressing Canada’s technical recession and warning that some data will be “uneven” “ah ah ah” as the government pushes through policy changes. The Wall Street Journal reported GDP weakness, including two consecutive quarterly contractions, while Carney framed the pain as part of a broader economic rebuild.

That is where the sales pitch gets slippery.

When the economy weakens under Conservatives, it is called failure. When it weakens under Liberals, it becomes “transition”, “restructuring”, or “long-term transformation”. Same corpse, nicer label on the toe tag.

The deeper problem is that Canadians were never really asked whether they wanted Carney’s ideology. They were sold competence, not doctrine. They were sold expertise, not a governing philosophy that puts the state, regulators, climate finance, and elite managerial planning at the centre of national life.

Nobody knocked on doors saying, “Would you like a prime minister who believes markets should be bent around elite-defined social and environmental values?” No. They said, “He is smart. He ran banks. He knows Trump. He will steady things.”

That is not a mandate. That is a branding exercise.

And this is why the Conservative attack has to get sharper. Not louder. Sharper.

Calling voters stupid is a dead end. Many Carney supporters are not stupid. They are terrified of Trump. They are tired. They are anxious. They are looking at housing, debt, food prices, crime, productivity, health care, and a country that feels smaller than it used to, and they want someone who looks like an adult. Carney gives them the visual. He gives them the voice. He gives them the vibe.

But vibes do not build houses. Vibes do not raise productivity. Vibes do not lower debt. Vibes do not attract investment. Vibes do not make young Canadians believe they have a future.

The Carney government’s strongest weapon is not success. It is emotional permission. It lets Liberal voters tell themselves they have moved on from Trudeau without admitting the Liberal machine remains fundamentally intact. Same operating system, cleaner looking wallpaper.

That is why 50% still support him.

They are not endorsing the results. They are postponing the verdict.

Canada does not need a better-spoken manager of decline. It needs a government willing to reverse the policies that caused the decline in the first place.

Because a tight ship headed toward the rocks is still headed toward the rocks.

May 7, 2026

“Nobody invented capitalism”

Filed under: Economics, History, Middle East — Tags: , , — Nicholas @ 03:00

On the social media site formerly known as Twitter, Anish Moonka responds to an auto-translated-from-German post by Hayek-Club Weimar:

There’s a clay tablet with the founding charter of a 12-partner company on it. Twelve merchants pooled 33 pounds of gold to start the firm. The contract has the partner names, the starting capital, the profit split, and the penalty for cashing out early.

The tablet is nearly 4,000 years old. It was found at a site called Kanesh, in central Turkey. Archaeologists have dug up 23,500 of these clay records there, most of them business documents: receipts, loan contracts, shipping orders, lawsuits. The houses they were stored in eventually burned. The fire baked the clay solid and preserved every record.

The merchants came from Assur, in modern-day Iraq. They loaded donkeys with tin and cloth and walked them 1,000 kilometers across mountain passes to Kanesh, roughly the distance from New York to Atlanta. Each donkey carried about 180 pounds and the trip took two to three months. They came home with silver and gold.

The company ran for twelve years under a merchant named Amur Ishtar. A third of the profits went back to the investors. Pull your share out early and the firm gave you four kilos of silver per kilo of gold, half the normal rate. Locked-up money was meant to stay locked up.

That one company was just a tiny piece. The tablets show a complete economy with partners suing each other in commercial court, husbands writing home about prices, and wives writing back complaining the husband had been gone too long. A woman named Ahatum quietly lent silver to four different men over nine years. People bought up other people’s loan documents and used them as collateral for new loans, the same thing Wall Street does today with mortgage-backed securities. One merchant got caught smuggling tin in his underwear to dodge a 10% import tax.

In 2019, four economists from Harvard, Sciences Po, Chicago, and Virginia ran the tablet numbers through a gravity model, the math economists use today to predict how much two countries will trade based on size and distance. The Bronze Age numbers matched modern trade numbers almost exactly. Trade fell off with distance at nearly the same rate it does between countries today. The paper ran in the Quarterly Journal of Economics.

There was no economic theory yet. The idea didn’t even have a name. The word “capitalism” wouldn’t be coined for another 3,800 years, and Adam Smith was 3,700 years away from writing a sentence about markets. Just a guy named Pushu-ken writing a clay tablet to his business partner about a shipment of cloth, and a woman in Assur recording who owed her how much silver. Capitalism was already there, doing its full job, almost four thousand years before anyone wrote down a theory of how it worked.

March 31, 2026

Reaction to Avi Lewis being elected federal NDP leader

Filed under: Cancon, Economics, Media, Politics — Tags: , , , , — Nicholas @ 03:00

On the social media site formerly known as Twitter, L. Wayne Mathison responds to an ill-informed snipe at @TheFoodProfessor for a post about Avi Lewis:

This take reads like someone who’s never had to meet a payroll or balance a ledger under real pressure.

Accusing the “Food Professor” of being bribed is just noise. No evidence, no numbers, just a conspiracy to avoid the actual argument. Classic move when the facts aren’t cooperating.

I ran a grocery business. Not a theory. Not a model. A real one. Thin margins, constant spoilage risk, price swings, labour costs, supplier pressure, and customers who notice every 10-cent increase. Grocery isn’t some gold mine. It’s a logistics grind with razor-thin profit.

Here’s the part people like this never mention:
Canada’s total grocery profits are roughly $6 billion. Spread that across 40 million people and you’re looking at maybe $12 a month per person if you wiped out every dollar of profit.

So what’s the fantasy here?

Government steps in, runs stores “for the people”, eliminates profit… and somehow prices magically drop while efficiency improves?

Let’s test behaviour, not intentions.

What happens when you remove profit?

No incentive to optimize operations
No accountability for waste
Political hiring instead of performance hiring
Pricing driven by optics, not supply reality
Losses covered by taxpayers … meaning you, again

You don’t eliminate costs. You just hide them and move them.

I lived through high interest rates north of 20%, carried customer debt, and still had to make the numbers work. Government doesn’t operate under that discipline. It can fail indefinitely and call it policy.

Public grocery isn’t “not Marxist”. It’s not even that sophisticated. It’s just naive.

The real issue isn’t ideology. It’s a complete lack of understanding of how incentives drive outcomes.

You don’t fix affordability by replacing people who have to be efficient with a system that doesn’t.

You fix it by increasing competition, reducing regulatory drag, and letting supply actually respond.

Everything else is theatre.

In the National Post, Kelly McParland outlines the scale of challenge Lewis is facing to make the NDP electorally viable again:

Thumbnail of one of Avi Lewis’s campaign shorts

After two weeks on the road [Jagmeet Singh] finally conceded to reality, allowing that while “I would be honoured to serve as prime minister … I don’t want to presuppose the outcome of the election”.

Maybe Lewis should start straight off with that line, since choosing him as leader saves the party from pretending it expects to find itself in power. “The return of the NDP starts today!” Lewis declared in his victory speech, but as the most out-there ideologue of the candidates he defeated he’ll have a harder time convincing ordinary Canadians than he did winning over his fourth-place party. A film-maker and activist, he’s not just left-wing, but way off in a universe of his own.

His ambitions are dazzling: a Canada powered entirely by renewable energy in which everyone gets a guaranteed income, vast infrastructure projects are built to sustain the environment, farmers produce healthier, affordable, cleaner food while homebuilders concentrate on energy-efficient homes for lower income groups. All this paid for by an economy that somehow remains vibrant while its vital energy industry is crippled, jobs are lost, taxes are raised, royalties are increased, government spending balloons, the carbon tax is re-introduced and “the rich” are somehow found to have plenty of excess revenue to cover the costs.

Voters who continue to back the NDP will now know exactly what they’re casting their ballots for. That wasn’t always clear under previous leaders. Thomas Mulcair didn’t hate trade deals or pipelines enough to satisfy party stalwarts deeply hostile to both. To the unyielding, Singh did a deal with the devil when he agreed to prop up Justin Trudeau’s Liberals, even if the decision succeeded in squeezing out some policy victories.

Small victories aren’t in Lewis’s lexicon. He wants a revolution. “This is more than a rigged economy, it is a war on working people”, he declared on Sunday. “It is immoral, it is unCanadian and we cannot let it stand.”

March 7, 2026

Reported preference versus revealed preference – know the difference

Filed under: Business, Economics, Gaming — Tags: , , , — Nicholas @ 03:00

On the social media site formerly known as Twitter, Devon Eriksen encapsulates the experiences of so many companies who found a male-oriented market and then they try to make their offerings more appealing to women:

Most business suicides are induced by not understand[ing] the difference between reported preference and revealed preference.

If you run Testosterone Studios, maker of Angry Muscular Axe Guy Kills Demons in Hell, you might notice after a while that not very many women buy your games.

Since your stockholders have a profound moral objection to other people having money and not giving it to them, they want you to correct this problem, stat.

They want you to make Angry Muscular Axe Guy Kills Demons in Hell 2 sell to men AND women. So you sigh, shrug your shoulders, hire a bunch of female consultants, and ask them “What do women like?”

“Feminism!”

“Girlbosses!”

“Strong Female Characters effortlessly outdoing men at everything!”

“Gay stuff!”

So Testosterone Games dutifully makes Petite Feminist Girlboss Replaces Angry Muscular Axe Guy, hoping that men will buy it because they bought the first one, and girls will buy it because it panders to what they were told girls want.

Of course, nobody buys it. The men don’t buy it because it’s not what they liked in the first one, and women don’t buy it because women couldn’t care less about games where you fight demons in hell.

If, instead of asking a bunch of consultants what women like (reported preference), they had looked at games women actually buy (revealed preference), they would have seen something very different.

“Fruit Matcher 3000 for iPhone.”

“Point and Click Alice in Wonderland Studio Ghibli Adventure”

“Something Something Hogwarts.”

And they would have realized, had they two brain cells to rub together, that you can’t please everyone, because some people hate exactly what other people like.

If you want more money, look at who is already buying your product, and see if you can make them like the next one better. Because I guarantee you aren’t already selling to every single male on the planet.

And don’t hire video game consultants.

They don’t know how to sell games, and they don’t care, because they don’t want to sell games. They just hate men, and want to ruin things men like. If you hire them, they’re going to have their fun, cash your check, and ride off into the sunset, while you lose your business.

And indie studios, who know whether they are making Aliens Must Die or Barbie Horse Adventures, will replace you, which is the free market operating as intended.

February 23, 2026

“The aim always being to shoot the kulaks and who cares about the reasoning?”

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

It’s funny how the latest crisis always seems to have the same recommendations from the great and the good of the land – give us more money and more power. Pollution? More money and more power, please. Global poverty? More money and more power, please. Climate change? More money and more power, please. So it’s not really surprising that when the great and the good decide that global wealth inequality is a huge and growing problem, well, we all know what they’re going to recommend, don’t we?

As we all know, because we’re all told it so often, global wealth inequality is rising. Therefore something must be done! Punitive taxation and the bureaucrats get to spend everything, obviously.

The one little problem with this is that the aim, intention, is always punitive taxation and the bureaucrats get to spend everything and damn the actual evidence used to support the proposal. It’s all sub-Marxoid ever increasing concentrations of summat and therefore the kulaks need to be shot. The aim always being to shoot the kulaks and who cares about the reasoning?

30 years back — and yes, I am old enough to recall this — it was all about how income was becoming more unequal in its distribution. Therefore punitive taxes, the bureaucrats get to allocate everything and hey, look, we can shoot the kulaks! This all rather fell apart when it was pointed out that the actual effect of global neoliberalism was that income inequality was declining. For which we can thank the work of Branko Milanovic. Who did prove that income inequality was declining under global neoliberalism.

Thus, to my mind, the move to squeeing about wealth inequality. For we need that reason to shoot the kulaks and damn the intellectual perversions required to find it.

And, well, Branko and his numbers again, eh?

    New paper on the capitalization of the world with @BrankoMilan just out!

    Capital income remains very unequally distributed worldwide, but inequality has slightly declined.

Oh. Global neoliberalism is reducing the inequality of capital income, is it? Why yes yes it is:

    Global capital income inequality has declined in the 21st century, with the Gini coefficient falling from 97% to 94%. Over the same period, the share of the world population with annual capital income above $100 increased from 12% to 27%. This implies more than a doubling of the number of individuals earning positive income from interest, dividends, rents, and privately-funded pensions.

That’s alarmingly high, yes. We’d all like it to be lower too. I certainly would. I’d like us all to be living in that bourgeois American upper middle class in fact. $100k a year family incomes, $500k (later in life, obviously) in the 401(k) and all that. You know, bring it on.

We even have a mapped out plan about how we get from here to there. It’s in the SRES, which is the foundation of all that IPCC work about climate change. If we have globalised neoliberalism for the rest of this century then we’ll all be approaching that — in current $ — American upper middle class income. If we power that by going fracking, developing out solar and so on then climate change won’t be a problem either. If we power it by not going fracking and turn back to the use of coal then Bangladesh gets it. But the base idea that all will rise up into those bourgeois pleasures of three squares, a warm crib and choices in life really is in there. And, yes, it’s globalised neoliberalism that will take us there.

So, while it is alarmingly high, that inequality, we’re already solving it as we did income inequality — global neoliberalism. Pity no one gets to shoot the kulaks but there we are, reality doesn’t always accord with desires.

January 22, 2026

California considering a new way to kill the golden goose

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

When I first heard about California’s proposed “Billionaire Tax” I thought it was a joke — nobody could be that economically illiterate. But I was wrong and the state really does seem to want to make their state economy a new case study in economics courses of the future. J.D. Tuccille explains why the tax, if implemented, is likely to impact a lot more folks who don’t rank as plutocrats:

California’s potential adoption of a one-time 5 percent “billionaire tax” on the net worth of high-value individuals is already sending wealthy residents fleeing for the exits. By one estimate, at least a trillion dollars has moved beyond the reach of state officials. But a new analysis says the tax may be even more onerous than advertised. Californians may need to get used to the sight of moving vans leaving the state.

Give Us 5 Percent of Everything You Own

Sponsored by a chapter of the Service Employees International Union, the proposed billionaire tax is set to appear as an initiative on the California ballot in November. According to the summary approved by state Attorney General Rob Bonta, the measure “imposes one-time tax of up to 5% on taxpayers and trusts with covered assets valued over $1 billion; covered assets include businesses, securities, art, collectibles, and intellectual property, but exclude real property and some pensions and retirement accounts”. If passed, the tax would apply to people resident in California as of January 1, 2026 — a retroactive element bound to be challenged in court.

[…]

Five Percent Understates the Pain

“The 2026 Billionaire Tax Act, a California ballot initiative, would ostensibly impose a one-time tax of 5 percent on the net worth of the state’s billionaires,” notes Jared Walczak for the Tax Foundation. “Due, however, to aggressive design choices and possible drafting errors, the actual rate on taxpayers’ net worth could be dramatically higher. One particularly momentous policy choice has the potential to strip the founders of some of the world’s largest companies of their controlling interests and force them to sell off a significant portion of their shares.”

According to Walczak, there are many ways in which the initiative creates situations under which “tax liability would be vastly more than 5 percent of net worth”. He focuses on six of them: valuations based on voting interests; assessment rules that can overvalue privately held businesses; excessive underpayment penalties that encourage overvaluing privately held businesses; anti-avoidance rules that tax more than the amount of transfers; provisions on spousal assets and debt to relatives that would tax nonresidents’ assets; and deferrals that would tax wealth that no longer exists.

As an example, Walczak points to the initiative’s means for valuing voting shares that aren’t publicly traded. DoorDash founder Tony Xu owns 2.6 percent of the company but controls 57.6 percent of voting rights. The initiative specifies, “the percentage of the business entity owned by the taxpayer shall be presumed to be not less than the taxpayer’s percentage of the overall voting or other direct control rights.”

That means Xu could be taxed on his voting rights rather than his economic stake in the company. That turns a $2.41 billion ownership interest into a $4.17 billion tax liability. It could force the conversion of voting shares to common stock for sale (subject to capital gains tax), and loss of control of the company.

The other provisions examined by Walczak also impose potential tax liabilities far beyond the 5 percent claimed by the initiative’s sponsors.

Charles Fain Lehman explains that the proposed tax will end up making everyone in California worse off:

… If you pick up all of Google’s employees and put them in Texas — where some of California’s billionaires might look to relocate — then one might assume they would be just as productive.

That would be a reason for non-Californians to be relatively sanguine about the wealth tax’s effects. Yes, it will be bad for California fiscally. But the titans of technology and entertainment can just set up shop in a red state and continue their work unabated.

But what if cities themselves have some additive effect? What if there’s something special about Los Angeles or San Francisco per se? What if the specific concentration of human capital in a specific place yields more than the output you’d expect if you put that same capital in a different place?

Source: Bhalothia et al, fig. 6.

As it turns out, that’s exactly what happens. Take recent research from economists at UC San Diego and Northwestern University. They use data on over 500 million LinkedIn users across 220,000 cities worldwide to ask how moving from one city to another affects an employee’s wages (a measure of their productivity). Because they observe the same people moving multiple times, they can disentangle the effects on wages of moving to a given city from the qualities of the people moving between cities.

The results are remarkable. The authors estimate that 93 percent of global wage variation is attributable to city effects, rather than to the qualities of workers themselves. That effect shrinks when you’re talking about movement within the developed world — someone moving from Bangalore to San Francisco gets a bigger wage bump than someone moving from Omaha to San Francisco, for example. But even looking at movers within their own developed country, cities explain something like 30 to 50 percent of the variance in wages.

In other words: it’s not just that people with better skills move to otherwise more desirable cities. Cities themselves make people worth more — meaning that they also increase total productivity and output, and therefore make the economy stronger.

How can it be that where you work is so important for how much you produce? The basic answer is what economists call agglomeration effects, the gains that come when firms cluster together. Agglomeration effects come, in general, from lowered barriers to exchange — of material goods, but also of ideas. Lots of start-up founders move to San Francisco because that’s where they can meet other start-up founders, and be on “the cutting edge” of what’s happening in their field. That’s only possible in a specific physical place.

Even if you put all the start-up founders in the same new part of Texas, moreover, they would still be worse off. Agglomeration economies come also from local culture and supportive industry infrastructure. Los Angeles as a city is built to support entertainers; San Francisco is built to support programmers. If you move those industries to Miami or Austin, neither city will be able to offer the same amenities — which is why both have struggled in their efforts to replace their Californian counterparts.

In other words: if California’s major industries leave California, they can’t be rebuilt somewhere else. Dismantle Silicon Valley, and you can’t just put it back together in Miami. We’ll still have technology companies, sure. But all else equal, they will be less productive than they would have been if they had stayed put. And we’ll all pay the price.

January 7, 2026

QotD: Refuting “Limitarianism”

Filed under: Books, Economics, Media, Politics, Quotations — Tags: , , , , — Nicholas @ 01:00

The visible edge of economic populism — the slogans, the soundbites — often conceals an intellectual iceberg beneath: ideas inherited from defunct economists, or sometimes living ones. One such idea with deep roots is limitarianism: the belief that there should be a cap on personal wealth.

Thomas Piketty defines it as “the idea that we should set a maximum on how much resources one individual can appropriate”. Its most articulate modern advocate is Ingrid Robeyns, whose recent book, Limitarianism: The Case Against Extreme Wealth, calls for a global wealth cap, which she suggests could be set around $10 million per person.

But limitarianism rests on an old intellectual error. An error common not only on the Left but even among some classical liberals too: the mistaken division between “production” and “distribution”. The assumption is that production happens through economic forces and that distribution is purely political, so policymakers can reshape who gets what without damaging how much is created.

This assumption leads to the view of the economy as a fixed pie. If one person has a large slice, others must go hungry. As Percy Shelley put it in Queen Mab (1813), “The rich have become rich by the toil of the poor … they increase in wealth by the misery of the workers”. While that may describe life under socialism, it misunderstands how wealth is generated in a capitalist system.

In capitalism, you can grow rich by making the pie bigger: creating products, companies, jobs and innovations that benefit not only yourself, but millions of others. This insight was first observed by French sociologist Gabriel Tarde, and later expanded by economists like Ludwig von Mises and Friedrich Hayek. Tarde noted how luxuries eventually become necessities. His example was forks and spoons, once the preserve of the wealthy, now found in every home.

For our generation, consider childbirth. Queen Anne had 17 pregnancies, yet none of her children survived to adulthood. Today, even the poorest families in developed countries can expect their children to live. This transformation wasn’t delivered by committees or redistribution. It was driven by the freedom of innovators to experiment, often starting with products only the wealthy could afford.

As Hayek wrote in The Constitution of Liberty:

    What today may seem extravagance or even waste, because it is enjoyed by the few and undreamed of by the masses, is payment for the experimentation with a style of living that will eventually be available to many.

Mani Basharzad, “What Zohran Mamdani Doesn’t Understand about Wealth”, Foundation for Economic Education, 2025-09-30.

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