Quotulatiousness

September 4, 2012

TANSTAAFL is not the whole story

Filed under: Economics, History, Liberty — Tags: , , , — Nicholas @ 12:25

At The Freeman, Sandy Ikeda points out that the handy little saying “There ain’t no such thing as a free lunch” is not enough to explain modern prosperity::

Economics teaches us the importance of TANSTAAFL and capital investment. Again, the trouble is they are not the whole truth.

As I’ve written before, however, there is such a thing as a free lunch, and I don’t want to repeat that argument in its entirety. The basic idea is that what Israel M. Kirzner calls “the driving force of the market” is entrepreneurship. Entrepreneurship goes beyond working within a budget — it’s the discovery of novel opportunities that increase the wealth and raises the budgets of everyone in society, much as the late Steve Jobs or Thomas Edison or Madam C.J. Walker (probably the first African-American millionaire) did. Yes, those innovators needed saving and capital investment by someone — most innovators were debtors at first — but note: Those savings could have been and were invested in less productive investments before these guys came along.

As McCloskey, as well as Rosenberg and Birdzell, have argued, it isn’t saving, capital investment per se, and certainly not colonialism, income inequality, capitalist exploitation, or even hard work that is responsible for the tremendous rise in economic development, especially since 1800.

It is innovation.

And, McCloskey adds, it is crucially the ideas and words that we use to think and talk about the people who innovate — the chance takers, the rebels, the individualists, the game changers — and that reflect a respect for and acceptance of the very concept of progress. Innovation blasts the doors off budget constraints and swamps current rates of savings.

[. . .]

Indeed, innovation is perhaps what enables the market economy to stay ahead of, for the time being at least, the interventionist shackles that increasingly hamper it. You want to regulate landline telephones? I’ll invent the mobile phone! You make mail delivery a legal monopoly? I’ll invent email! You want to impose fixed-rail transport on our cities? I’ll invent the driverless car!

McCloskey’s book has shown up a few times on the blog.

September 3, 2012

The great maple syrup heist must have been an inside job

Filed under: Business, Cancon, Food — Tags: , , , — Nicholas @ 10:02

The first time I heard about Quebec’s strategic maple syrup reserve was when someone made off with a quarter of the province’s sweet, sticky liquid:

On Friday, news broke that thieves had stolen $30 million dollars worth of Quebec’s strategic maple syrup reserves. Much as the United States keeps a stock of extra oil buried in underground salt caverns to use in case of a geopolitical emergency, the Federation of Quebec Maple Syrup Producers has been managing warehouses full of surplus sweetener since 2000. The crooks seem to have made off with more than a quarter of the province’s backup supply.

[. . .]

But harvesting maple is a fickle business, and that makes expanding the industry tricky. The trees need cold nights and mildly warm days to yield sap, meaning production can vary greatly year to year based on the weather. That’s a potential problem for the big syrup buyers, whether they’re bottlers or large food companies that make cookies or cereal. Quaker can’t pour a bunch of time and money into developing a maple-and-brown-sugar-flavored version of Life, only to find out it won’t be able to get enough of its ingredients, or that they’ll have to pay through the nose for each liter of syrup.

H/T to Nicholas Packwood for the link.

August 15, 2012

Canadian liberty, 1776-2012

Filed under: Cancon, History, Liberty, USA — Tags: , , , , — Nicholas @ 09:32

F.H. Buckley has an interesting article in the National Post, comparing the American and Canadian “flavours” of liberty from the American Revolution down to today:

The Fathers of Confederation had seen the American constitution close up and didn’t want any part of it. They didn’t foresee just how we’d turn out. Overall, however, our good fortune would not have surprised them, for they knew that they were founding a free country.

On reading the Confederation debates, one is struck by how the Fathers insisted that we had real liberty in Canada, more so even than Americans. That comes as a bit of a shock, as we had thought that Americans had property rights in liberty. They owned it, and on occasion were kind enough to try to export it to lesser countries, as they did 200 years ago in the War of 1812 (where they came in a very strong second).

[. . .]

When McGee and the other Fathers looked south, they saw a country with more of Constant’s liberty of the ancients but less of the liberty of the moderns. Moreover, of the former, the right of self-government had been corrupted by political machines and trivialized by elections for dogcatchers. The high ideals of the American Founders had been forgotten, and their republican virtue was now, in the era of Boss Tweed and Jay Gould, little more than American braggadocio. As for the liberty of the moderns, there was that little matter of slavery and its aftermath. True, Americans could express themselves through lynch-parties, but that was the kind of liberty the Canadians did not want.

Many of the differences between the two countries remain, but Canadians no longer have more of the liberty of the moderns than Americans. In both countries, benign neglect has been replaced by the bureaucrat’s officious nudges, giving us ugly light bulbs, toilets that don’t flush and idiotic playground rules. Could one have predicted this 25 years ago? I think not. Back then I had legal scholar Cass Sunstein over for dinner. Until a few days ago he was Obama’s regulatory czar, and over dinner in 1987 he predicted how the regulatory state would expand, in the name of risk reduction. “Americans won’t stand for this,” my wife told him. They prize their freedom too much. “Ah, but we’ll change their preferences,” he replied. And he was right.

August 14, 2012

Ethanol: starving the third world, by government policy

Filed under: Economics, Environment, Food, Government, USA — Tags: , , , — Nicholas @ 08:47

Jeffrey Tucker on the absurd and cruel implications of a government mandate:

Corn prices are officially through the roof, spiking to record highs. It’s been headed this way through six years of crazy volatility. Now the spike is undeniable. At the same time, crop yields are lower they have been since 1995.

Everyone blames the drought, as if the market can’t normally handle a supply change. The real problem is that the corn market is fundamentally misshaped by government interventions that have made a mess of this and many more markets. The distortions are never contained, but spread and spread.

[. . .]

“Corn is the single most important commodity for retail food,” Richard Volpe, an economist for the USDA told the Los Angeles Times. “Corn is either directly or indirectly in about three-quarters of all food consumers buy.”

Fine, then, answer me this, Mr. Government Economist Man: Why is 40% of the corn crop being burned up in our gas tanks? The answer is a Soviet-like, fascist-like, stupid-like government mandate. It is actually relatively new. It came about in 2005 and 2007. It mixes nearly all the gas we can buy with a sticky product now in rather short supply.

Of all the government regulations I’ve looked at in detail over the last 10 years, the ethanol mandate is, by far, the worst. There are no grounds on which it is defensible. None!

Like so many government initiatives, this was supposed to do something good: reduce the consumption of fossil fuel for gasoline production by substituting a proportion of ethanol. While gas was expensive and ethanol was cheap this might make sense — but when ethanol becomes more expensive, and the raw material used to produce the ethanol would be far better used for food and feedstock, the whole policy becomes an act in the theatre of the absurd.

August 1, 2012

It’s not congressional gridlock: it’s abdication of responsibility

Filed under: Government, Politics, USA — Tags: , , , , — Nicholas @ 16:23

We’ve all seen journalists refer to the situation in the US congress as being “gridlocked”: the Democrats and Republicans just can’t manage to get along at all, leaving the system constipated and unable to function. Nick Gillespie and Veronique de Rugy in The Hill point out that this is letting the members of congress off far too lightly:

Many observers and participants — including the entire GOP and Democratic leadership — are quick to cry gridlock and to blame inaction on some new awful hyper-partisan or ideological era.

But there isn’t gridlock, which usually results from Democrats and Republicans sharing power and clashing over alternative positions. Gridlock slows things down — almost always a good thing — but it doesn’t stop serious legislation from happening. Welfare reform, balanced budgets, defense cuts and capital-gains tax rate cuts in the 1990s were all the product of gridlock that slowly gave way to consensus.

And today’s Congress is more than happy to pass legislation when it suits members’ interests. In just the past few months, for instance, the ostensibly gridlocked Congress reauthorized the Export-Import Bank program that gives money to foreign companies to buy U.S. goods; extended sharply reduced rates for government-subsidized student loans; re-upped the Essential Air Service program that subsidizes airline service to rural communities; and voted against ending the 1705 loan-guarantee program that gave rise to green-tech boondoggles such as Solyndra and Abound. None of these were party-line votes — all enjoyed hearty support from both Democrats and Republicans.

[. . .]

What we’re actually witnessing — and have been for years now — is not gridlock, but the abdication of responsibility by Congress and the president for performing the most basic responsibilities of government. Despite the fiscal crisis that Washington knows will occur if it fails to deal with unsustainable spending and debt, it hasn’t managed to produce a federal budget in more than three years.

July 27, 2012

The Ottawa Citizen calls for breaking up the booze monopolies

Filed under: Business, Cancon, Government, Wine — Tags: , , , , , , — Nicholas @ 13:16

Ontario has an odd relationship with alcohol sales. Beer sales are controlled through a protected monopoly (The Beer Store, formerly known as the Brewer’s Retail), while liquor sales are mostly through the government-owned LCBO stores. There are a few exceptions: Ontario wineries are allowed to sell wine at the winery, and craft brewers can also do retail sales at the brewery. Certain privileged large wineries are allowed to sell their own products (not all of which are actually Ontario wines) through a limited number of retail stores, usually co-located with grocery stores.

An editorial in the Ottawa Citizen makes a good case to blow up the current system and take the government out of the retail sales market altogether:

There are two main arguments defenders make for protecting the LCBO from any more competition.

The first is that only a government-operated retail chain can keep alcohol out of the hands of children. That argument is so weak it barely deserves a response, yet it never seems to die. As mentioned above, private operators already sell alcohol, and must follow the rules. Corner stores sell cigarettes, which also have strict rules governing the age of the purchaser. And private stores are already selling alcohol under the LCBO banner, especially in areas where the population doesn’t justify a stand-alone LCBO store.

Under a good enforcement regime, with stiff penalties for non-compliance, private operators have every incentive to follow the rules.

The second argument is that the LCBO is a money-maker for the government, so most private-sector competition must remain illegal.

It’s an honest argument, but that’s about all it has going for it. Would we allow the state to tell private store-owners that they couldn’t sell, say, chairs, or T-shirts, because the government needs to corner that business?

The government should have the power to tax. It should have the power to restrict sales to minors, and set rules to enforce that. It should not have the power to elbow Canadians out of certain industries. Not only is this an unjustified use of the powers of the state, but it reduces competition, and the innovation that accompanies competition.

Marni Soupcoff agrees with the Citizen‘s editorial stance:

The Beer Store and the LCBO do a decent enough job that most Ontarians don’t get more exercised about their forced dominance than grumbling a bit here and there. That’s a shame because the anti-competitive nature of the laws keeping beer and wine out of grocery and convenience stores is truly antithetical to a free society, particularly when the health and safety concerns are so bogus. The laws also end up having the pernicious consequence of conditioning Ontarians to expect their government to limit their consumer choice, and businesses their freedom, which makes us more likely to accept further encroachments down the road.

That’s an abstract argument on which to base a campaign for a policy change. The better talking point might be the one U.S. libertarian writer Jacob Sullum raised last year in article about state liquor monopolies: if they were really that good at serving customers, they’d have no reason to exist. The point of government retailing alcohol is supposed to be to make the nasty stuff less accessible. If the government retailer is putting out glossy magazines glorifying the joys of wine and food pairings and offering fancy tasting rooms and convenient store hours, hasn’t it defeated its own (dubious) purpose? In the LCBO’s case, it seems particularly absurd that a marketing director in charge of “Food & Drink & Visual Merchandising” gets paid almost $140,000 a year to entice customers to consume a product deemed too dangerous to be sold in a Sobey’s.

July 18, 2012

Who Exploits You More: Capitalists or Cronies?

Filed under: Business, Government, Liberty, Politics — Tags: , , , , — Nicholas @ 09:48

July 16, 2012

Toronto edges cautiously toward allowing wider range of “street food”

Filed under: Bureaucracy, Business, Cancon, Food, Government, Health — Tags: , , — Nicholas @ 13:14

Matt Gurney in the National Post on Toronto’s inch-by-glacial-inch move toward allowing a bit more variety in the foods street vendors can sell:

Last week, Toronto City Council approved hot dog vendors to sell an expanded variety of foods. The expanded list is still far from expansive. Veggie sticks, fruit salads and bagels with individually packaged butters are about the extent of the street food revolution in Toronto. Even these baby steps are progress, though — they follow the total failure of Toronto’s A La Cart program, which tried to expand the city’s food options to include more “ethnic” fare. The program, which should go down in history as the most botched effort the city has ever made, is Prosecution Exhibit A for those who believe that governments only exist to screw up things that really aren’t all that complicated.

But the city’s concern about street food, though overwrought and frankly embarrassing, at least comes from an honest place — concerns about spoiled food or improper preparation hurting public health. But Toronto has always missed the point. The public is protected when governments monitor outcomes and harshly punish failures, not seek to control process. Health inspections are an entirely reasonable part of the government’s job, with street food as much as any industry. And it seems that Toronto, while fretting about what food vendors might be doing wrong, hasn’t exactly been doing a bang-up job of its own responsibilities.

Hard though it is to imagine, other cities — even other Canadian cities — somehow manage to have all sorts of tasty treats for sale by food trucks, carts, and temporary kiosks without civilization crumbling.

July 11, 2012

Crony Capitalism: the issue that unites the Tea Party and the Occupy movement

Filed under: Business, Government, Liberty, Politics — Tags: , , , , , — Nicholas @ 09:17

Matthew Mitchell at the Mercatus Center:

Despite the ideological miles that separate them, activists in the Tea Party and Occupy Wall Street movements agree on one thing: both condemn the recent bailouts of wealthy and well-connected banks. To the Tea Partiers, these bailouts were an unwarranted federal intrusion into the free market; to the Occupiers, they were a taxpayer-financed gift to the wealthy executives whose malfeasance brought on the financial crisis.[1] To both, the bailouts smacked of cronyism.

The financial bailouts of 2008 were but one example in a long list of privileges that governments occasionally bestow upon particular firms or particular industries. At various times and places, these privileges have included (among other things) monopoly status, favorable regulations, subsidies, bailouts, loan guarantees, targeted tax breaks, protection from foreign competition, and noncompetitive contracts. Whatever its guise, government-granted privilege is an extraordinarily destructive force. It misdirects resources, impedes genuine economic progress, breeds corruption, and undermines the legitimacy of both the government and the private sector.

[. . .]

… regulations can be especially useful to firms if they give the appearance of being anti-business or somehow pro-consumer. Regulations are often supported by strange bedfellows. Bruce Yandle of Clemson University has studied the phenomenon extensively:

The pages of history are full of episodes best explained by a theory of regulation I call “bootleggers and Baptists.” Bootleggers … support Sunday closing laws that shut down all the local bars and liquor stores. Baptists support the same laws and lobby vigorously for them. Both parties gain, while the regulators are content because the law is easy to administer.[25]

The moralizing arguments are often front and center in regulatory policy debates, while the narrow interests that stand to benefit from certain regulations are much less conspicuous.

July 9, 2012

The constipated British housing market

Filed under: Britain, Bureaucracy, Business, Economics, Government — Tags: , , — Nicholas @ 09:33

Tim Harford’s weekend column on the state of Britain’s housing market and a possible solution to the disconnect between supply and demand:

The chief obstacle to house building in the UK is the planning system, which, 65 years ago, did away with the idea that if you owned land, you could build on it, and replaced it with a system where planning permission was required. Permission to build houses is severely rationed, and such rationing can be seen clearly in the gap between the value of agricultural land without planning permission (a few thousand pounds a hectare) and the value of such land once permission has been granted (a few million).

The difficulty is that local authorities have the ability to grant planning permission but have little incentive to do so, because it tends to be unpopular with existing voters. The huge windfall from winning planning permission falls to whoever has managed to speculate on land and navigate the tangle of planning rules. These serve as nice barriers to entry for existing developers, while driving up the price of building land and so driving down the size of new homes.

Tim Leunig, chief economist at CentreForum, a think-tank, has proposed a two-part system of land auctions to get around this problem. Local authorities would buy land at auction, grant planning permission on it and then sell the land on to developers — with some strings attached, if they so choose. The profits would be enormous, and enjoyed by existing residents in the form of lower taxes or better public services. This isn’t the only way to liberalise planning, but it retains local control and democratic accountability — while dramatically increasing the incentive to develop.

Restoring a free market right to build on property you own would also be a fast solution to the diminished housing supply, but when have governments at any level willingly given up power?

July 6, 2012

This might be damage that even the Internet can’t route around

Filed under: Law, Liberty, Media, Technology, USA — Tags: , , , — Nicholas @ 12:50

Tim Worstall on the worst-case interpretation of a recent legal decision in the US courts:

… we now have a ruling that websites are a place of public accommodation under the Americans with Disabilities Act. If this ruling holds then this really will break the internet and web as we have come to know it.

The case is discussed here.

    The case involves a Cyberlaw perennial: are websites obligated to comply with the Americans with Disabilities Act (the ADA)? In this case, the desired accommodation is close-captioning for Netflix-streamed video. If websites must comply with the ADA, all hell will break loose. Could YouTube be obligated to close-caption videos on the site? (This case seems to leave that door open.) Could every website using Flash have to redesign their sites for browsers that read the screen? I’m not creative enough to think of all the implications, but I can assure you that ADA plaintiffs’ lawyers will have a long checklist of items worth suing over. Big companies may be able to afford the compliance and litigation costs, but the entry costs for new market participants could easily reach prohibitive levels.

[. . .]

The place of publication is where the reader is, where the browser through which the site is being viewed. Thus would mean that any foreign website which an American might want to read (say, my personal blog) would become subject to the rules and restrictions of the ADA. And believe me, the 6.7 billion people who are not Americans are not going to put up with that. We might all ignore the law, or we might try and ban access from the US (or more alarmingly, ISPs might be told to do so). Or possibly be subject to the tender ministrations of an ambulance chasing lawyer.

July 5, 2012

Between loopholes and exemptions, Bloomberg’s soda rules fail to address real problem

Filed under: Food, Government, Health, USA — Tags: , , , — Nicholas @ 10:35

Jacob Sullum has a modest proposal to fix NYC Mayor Michael Bloomberg’s ineffectual soda rule:

At a Board of Health meeting last month, several members zeroed in on the most obvious problem with Mayor Bloomberg’s plan to shrink New Yorkers’ waistlines by shrinking their soft drink servings: It does not go far enough.

One member questioned the exception for milk-based beverages such as shakes, which “have monstrous amounts of calories.” Another noted that the carveout for convenience stores, supermarkets and vending machines (which are not regulated by the city’s Health Department) means 7-Eleven’s Big Gulp — the epitome of effervescent excess — will remain available. There also was murmuring about the continued legality of free refills, which will let people drink as much soda as they want, provided they do it 16 ounces at a time.

But one glaring gap in Bloomberg’s big beverage ban went unprobed: Why limit the limit to soft drinks? What about the hard stuff?

[. . .]

With all that in mind, think about eggnog, which is doubly exempt from Bloomberg’s drink order, since it is milk-based and alcoholic. This drink is a horror measured by calories alone, clocking in at 50 or so an ounce, more than four times the count for sugar-sweetened soda. Yet this lurking threat to thinness and sobriety is untouched by Bloomberg’s pitiful pint-size pop prescription.

Beer, also exempt from Bloomberg’s serving ceiling, can contain as many as 28 calories an ounce — more than twice as many as soda. Why do you think they call it stout?

Some sensible regulation in this area could head off many incipient beer bellies and lots of loutish behavior at Yankee games. Instead of the mayor’s arbitrary 16-ounce limit, why not simply decree that all beer orders from now on will be light beer orders? Taste is a small sacrifice to make for public health.

July 4, 2012

British banks are “a cossetted, subsidised industry with captive consumers”

Filed under: Britain, Economics, Government — Tags: , , , — Nicholas @ 08:46

If any industry has more than its fair share of “too big to fail” wards of the state, it’s the banking sector. Allister Heath in the Telegraph:

There is a horrendous problem, certainly, and urgent reform is required. But the ailment has been fundamentally misdiagnosed: banking has become a ward of the state, a cossetted, subsidised industry with captive consumers, and it is that which has crippled it. We have been there before, in other sectors, and the medicine is always the same. This may come as a shock, but we need more capitalism in banking, not less.

Banks need to be allowed to go bust, like every other private company. It was a disgrace that taxpayers were called upon to bail out some of the City’s grandest names. This must never happen again. The reason capitalism works so well, whenever it is tried properly, is that the principle at its heart — profit and loss — is the toughest of disciplines and the best of motivators. It is more ruthless than anything regulators, however clever, could ever dream up. It allows two conflicting emotions, greed and fear, to balance one another out. Shareholders, creditors and bosses want to make money — but they know that a step too far might entail ruin.

That, at least, is how it works for much of UK Plc — but no longer in banking, where profits have been privatised and losses nationalised. It is an obscene perversion of capitalism. Forget the nonsense about “light touch” regulation: the problem is that the fear of failure ceased to exist. Market discipline was replaced by extreme laxity.

There was no longer much need for prudence, proper capital buffers or strict internal controls: the taxpayer was ready to pick up the bill if anything went wrong, while incompetent regulators signed everything off. The Labour government which introduced this mad system wasn’t deliberately seeking to subsidise risk: it merely made a terrible mistake, though with the politically useful side effect of reducing the cost of credit and increasing its availability. The real blunder was that the Financial Services Authority had no plan to cope with a bank going bust. It simply assumed failure would never happen. After all, how could it? Gordon Brown had abolished booms and busts.

July 2, 2012

Alex Tabarrok on the slow rail and infrastructure bottleneck

Filed under: Bureaucracy, Economics, Government, Railways, USA — Tags: , , , , , , — Nicholas @ 10:58

Writing at Marginal Revolution, Alex Tabarrok wonders “Why haven’t the $500 bills been picked up?”:

High speed rail, especially California’s project, looks to me to be monorail economics, a costly boondoggle whose appeal lies not in rational calculation […] but in the desire of some politicians (and voters) to feel visionary and sexy. In theory, CA HSR might work but the inevitable reviews, delays, lawsuits and special interest payoffs make the prospects of a beneficial project look dim, demosclerosis kills.

Slow speed rail, however, i.e. freight transport, isn’t sexy but Warren Buffett is investing in rail and maybe we should as well. In particular, there are basic infrastructure projects with potentially high payoffs. Congestion in Chicago, for example, is so bad that freight passing through Chicago often slows down to less than the pace of an electric wheel chair. Improvements are sometimes as simple as replacing 19th century technology with 20th century (not even 21st century!) technology. Even today, for example:

    …engineers at some points have to get out of their cabins, walk the length of the train back to the switch — a mile or more — operate the switch, and then trudge back to their place at the head of the train before setting out again.

In a useful article Phillip Longman points out that there are choke points on the Eastern Seaboard which severely reduce the potential for rail:

    …railroads can capture only 2 percent of the container traffic traveling up and down the eastern seaboard because of obscure choke points, such as the Howard Street Tunnel in downtown Baltimore. The tunnel is too small to allow double-stack container trains through, and so antiquated it’s been listed on the National Register of Historic Places since 1973. When it shut down in 2001 due to a fire, trains had to divert as far as Cincinnati to get around it. Owner CSX has big plans for capturing more truck traffic from I-95, and for creating room for more passenger trains as well, but can’t do any of this until it finds the financing to fix or bypass this tunnel and make other infrastructure improvements down the line.

June 27, 2012

California primed to make bad decision for “good” reasons

Filed under: Environment, Food, Government, Health, Science, USA — Tags: , , , , — Nicholas @ 00:05

California’s already bad economic situation could be made even worse by mandating that genetically modified foods be labelled to call attention to themselves:

The American Medical Association resolved this week that “there is no scientific justification for special labeling of bioengineered foods.”

The association has long-held that nothing about the process of recombinant DNA makes genetically engineered (GE) crop plants inherently more dangerous to the environment or to human health than the traditional crop plants that have been deliberately but slowly bred for human purposes for millennia. It is a view shared by the National Academy of Sciences, the World Health Organization, the Food and Agriculture Organization of the U.N., the European Commission, and countless other national science academies and non-governmental organizations.

And yet Californians will consider on their November ballots a law that mandates cigarette-like labeling of food derived from GE plants. Proponents claim to promote opportunities for consumers to make informed choices about the foods they eat. But to build support for the measure, they have played on consumer fears about a promising technology that is nevertheless prone to “Frankenfoods” demagoguery. If successful, they may well imperil the ability of Californians, and consumers around the world, to choose a technology that scientists contend could end hunger and malnutrition, lift hundreds of millions from poverty, and reduce the environmental impact of feeding an evermore populous world.

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