Quotulatiousness

November 18, 2020

Trudeau’s internet policy — cash grab or power grab? Embrace the healing power of “and” (TM Instapundit)

Filed under: Business, Cancon, Government, Media, Technology — Tags: , , , , , , — Nicholas @ 03:00

The Canadian government is taking advantage of the ongoing economic and social disruption of the Wuhan Coronavirus to widen their existing regulation of both broadcasting and internet entertainment. It’s not just a bit of maple-flavoured cultural imperialism, but it’s also a blatant cash grab:

Canadian Heritage Minister Steven Guilbeault, 3 February 2020.
Screencapture from CPAC video.

I see, in the Globe and Mail, that Justin Trudeau and Steven Guilbeault want to further regulate the broadcasting services in Canada. Their goals seem to be, in part, a cash grab ~ online streaming services, like Netflix, are offering Canadians, for a price, what they want, while the CBC offers Canadians, thanks to a $1+ Billion annual subsidy from taxpayers like you and me, what we, pretty clearly, do not want to watch and the Liberals want a share of that money ~ and also an appeal to those who play identity politics.

I think we need to look at the “products” of broadcasting ~ information (news and “public affairs” and documentary programmes) and entertainment, including sports, as “consumable products,” rather like food and, say, soft drinks.

We do allow, even demand that governments exercise some important regulatory functions in regard to food and soft drinks: we want to make sure that they are safe to consume and Canadians want to know what is in the food we consume.

The Canadian Radio-television and Telecommunications Commission (CRTC) was, originally, conceived to solve a fairly simple problem: allocating broadcast licences. Government engineers calculated how many radio channels could be used in any given place but they didn’t want to have to decide who should get to use them. Politicians didn’t want to do it, either, because while the successful applicant was (usually) happy the more numerous unsuccessful ones were disappointed and politicians hate to disappoint people. Thus they created an arms length agency to make the tough decisions for them. Licence allocation is still an important job for the CRTC. But the CRTC’s mandate was expanded with the birth of cable TV. Companies, like Rogers, built cable systems ~ and they received both direct and indirect government support to reach more and more Canadians ~ and then “sold” access to consumers. In the normal course of events one might have thought that the government would attach some business conditions to its loans, grants and tax deductions, but there was an ever-growing demand, from the Canadian cultural community ~ based almost entirely in Montreal and Toronto ~ to regulate the fledgling cable and “pay TV” market to ensure that Canadian programmes were not shut out but, in fact, could have privileged positions in the cable lineup, which led to the government, in the 1960s, telling the CRTC to regulate how companies like Famous Players, Maclean Hunter and Rogers configured the private product they sold to individual consumers.

The initial government argument was “we regulate all kinds of things for the common good: that’s why we all drive on the right, for example, and the delivery of broadcasting by cable is like that.” “No it’s not,” the cable operators replied, “you build and maintain the roads, using taxpayers’ dollars, so you’re allowed to regulate how they’re used, plus it’s a safety issue. Cable service and ‘pay TV’ are private, commercial transactions between us, the companies who built and operate the systems, and the individual consumer who wants to subscribe to what we offer. You don’t presume to regulate, beyond the laws against libel and pornography, what people can read in MacLean’s magazine or the Globe and Mail, why is ‘pay TV’ and cable different?” It’s still a good question. But the cable operators surrendered gracefully and the CRTC has been, broadly, for the last half-century, protective of the rights of incumbents in the infotainment markets. In return the cable and internet operators have agreed to “tiers” of programming which means that if you want to watch, say, BBC World Service or Deutsche Welle or Fox News, you must also pay for CBC News Network and CTV News Channel and, no matter who you are and what your individual preferences might be, when you subscribe to a cable/internet service you must also support a number of French stations/channels; it’s the law. And now Minister Guilbault wants to ensure that you pay for the output of indigenous producers, writers, actors and so on, on both indigenous networks ~ to which you must already subscribe if you have a “basic” Canadian cable or satellite TV package ~ and, it appears to me, in programmes produced by Canadians and even by Netflix.

November 14, 2020

People are working from home? Gotta tax that!

Filed under: Business, Government — Tags: , , — Nicholas @ 03:00

I am … unimpressed … with this sudden urge to impose new taxes on people who are currently working from home (I was working from home before it was cool, so I clearly have an interest in this issue). In the Vancouver Sun, Colby Cosh discusses the “wisdom” of this latest proposed tax grab:

One of the joys of working from home – being your own tech support.

This is the first time I have heard this “obvious” idea in any setting, but maybe that’s me. Telecommuting has experienced rapid growth in the decades I’ve been doing it, but before the pandemic it remained more or less at barely detectable levels. [Deutsche Bank economist Luke] Templeman believes that, “Our economic system is not set up to cope with people who can disconnect themselves from face-to-face society. Those who can WFH receive direct and indirect financial benefits and they should be taxed in order to smooth the transition process for those who have been suddenly displaced.”

As Templeman describes it, you would have to have been a crazy idiot not to work from home all along if it were possible. “WFH offers direct financial savings on expenses such as travel, lunch, clothes and cleaning. … Then there are the intangible benefits of working from home, such as greater job security, convenience and flexibility. There is also the benefit of additional safety.”

This would be my own assessment, except for the gibberish parts (job security?), but you will notice that this is the opposite of [Bank of England chief economist Andy] Haldane’s October argument. Haldane thinks there are negative externalities and even net costs to the individual in working from home. Templeman thinks WFH is an inarguable optimum … and is hot as a $2 pistol to disincentivize it.

Does this make sense? Not economically. Templeman is making more of a moral argument that the great shift to WFH is permanent, for which there is some survey evidence, and that it is proper to tax the resulting windfall to ease the adjustment for affected sectors (businesses designed to cater to office workers, basically). This might persuade you, if like Templeman you mistake an “economic system” for the arrangements produced by that system; but if it does, wait till you see how he proposes to do it:

    The tax will only apply outside the times when the government advises people to work from home (of course, the self-employed and those on low incomes can be excluded). The tax itself will be paid by the employer if it does not provide a worker with a permanent desk. If it does, and the staff member chooses to work from home, the employee will pay the tax out of their salary for each day they work from home. This can be audited by co-ordinating with company travel and technology systems.

There is more gibberish here, and at least one idea of Godzilla-scale terribleness — an incentive for employers to “provide” a desk for the purpose of shifting the WFH tax onto the employee. Undeterred, Templeman proposes for modelling purposes that the tax could be a flat five per cent of salary (which is also ridiculous if there’s a single eligibility threshold).

November 13, 2020

Oddly, the Canadian media evince no interest whatsoever in the Trudeau government’s malign plans for the Internet

Filed under: Business, Cancon, Government, Media — Tags: , , , , , , — Nicholas @ 03:00

In The Line, Peter Menzies shows how little the mainstream media outlets in Canada care about the power grab the feds are attempting with their proposed “get money from web giants” shakedown:

Canadian Heritage Minister Steven Guilbeault, 3 February 2020.
Screencapure from CPAC video.

In order to understand where media and public attention has been the past couple of weeks, all you had to do was listen in on Monday morning’s Ottawa news conference.

Six days after Heritage Minister Steven Guilbeault had introduced ground-breaking legislation to regulate content online, Prime Minister Justin Trudeau announced more cash to bring better Internet to rural and remote communities. There were also some COVID-19 updates and something about help for agriculture.

And, of course, the questions asked by the media were about the U.S. election. What else could possibly be of interest?

Eventually there were a few inquiries about Telesat and low-Earth-orbit satellites, but you get the point: things that matter to people’s daily lives such as cable bills, data plans, Netflix, cellular service, crappy WiFi and slow Internet connections haven’t been of much interest to Canadian media lately.

So there has been a dearth of chatter about Guilbeault’s controversial plan to (my words, not his): restrict consumer choice, tax Netflix to finance certified Canadian content (Cancon) and bring to an end the greatest period of prosperity in the history of the Canadian film and television industry. Did I mention stifling innovation, increasing streaming subscription costs and scaring away investment? No? My bad. Those too.

Guilbeault has decided that the agency dedicated to defining the nation’s TV and radio diet — the Canadian Radio-television and Telecommunications Commission (CRTC) — is now going to be in charge of what you are allowed to dine on online as well. No longer will you be able to manage your preferences. No more popcorn and candy for you. Going forward, Cancon spinach and broccoli will be on your plate every evening. Breathtakingly, Guilbeault has “modernized” communications legislation by giving authority over the Internet to something called a “radio-television” commission by using something still called the “broadcasting” act.

October 22, 2020

Carbon taxes may be the most efficient way to address GHG emissions, but no government has implemented them properly

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

I was persuaded by the economic arguments in favour of a carbon tax to address the externaly of greenhouse gas emissions, but I’ve long been skeptical that governments would actually implement them in a way to minimize economic distortion. A report from the Fraser Institute this week shows I was right to be doubtful, as none of the 31 OECD countries in the study have managed to introduce some form of carbon pricing without political “tinkering” … rather than replacing inefficient regulations, taxes and mandates with the carbon tax, they’ve generally just added carbon pricing on top of existing rules, making the carbon pricing scheme merely another tax grab that fails to achieve the stated goals:

Most economists consider human-made greenhouse gas (GHG) emissions an unintended negative externality of production and consumption. A negative externality occurs when the effects of producing or consuming goods and services impose costs on a third party which are not reflected in the prices charged for said goods and services. In the context of GHG emissions, this negative externality is calculated using the “social cost of carbon,” which is the future damage to society (adjusted to present value) of one additional tonne of carbon emitted to the atmosphere today.

Governments have a wide variety of policy alternatives to address the negative externality of emissions depending on the degree and depth of the policy intervention. They can either mandate individuals and firms to change their behaviour through com­mand-and-control regulations, grant subsidies and tax credits to foster cleaner energy sources, or use market-based mechanisms to correct the misalignment of incentives. It is widely acknowledged that carbon pricing, one of these market tools, is the most cost-effective policy to reduce emissions, as it relies on price signals and trade to provide flex­ibility to economic agents as to where and how emissions mitigation occurs.

[…]

This report includes thirty-one high-income OECD countries, where each country has either implemented a carbon tax, an ETS [emissions trading system], or a combination of both pricing mechan­isms. Carbon taxes are being implemented in 14 of them whereas 25 of these countries have their emissions covered by an ETS. Our analysis finds that, on average, 74 percent of carbon tax revenues in high-income OECD countries go directly into their general budget with no earmarking for any specific expenditure, while 12 percent are ring-fenced for environmental spending, and only 14 percent for revenue-recycling measures. This means that most governments are using carbon taxes as a revenue-raising tool rather than a mechanism to internalize the negative externalities of emissions in a cost-effective man­ner. Additionally, the vast majority of ETS revenues are being used to artificially acceler­ate the use of renewable energy sources, infrastructure, and technology.

The study also finds that no high-income OECD country has used carbon pricing to repeal emission-related regulations, but instead have introduced new ones following the adoption of the carbon tax or the ETS. Emissions caps, mandated fuel standards, technology-based standards, and renewable power mandates are just some examples of these regulations that undermine the cost-effectiveness of carbon pricing mechanisms. The majority of high-income OECD countries have a combination of support schemes for renewable energy sources, carbon pricing tools, and command-and-control regulations.

Overall, no high-income OECD country is following the textbook model of an optimal carbon pricing system, undermining their theoretical efficiency by design and implementation.

October 1, 2020

Far from being in trouble, Canadian film and TV investment has nearly doubled in the last 10 years

Filed under: Business, Cancon, Government, Media — Tags: , , , , , , , — Nicholas @ 03:00

The Canadian government — particularly Canadian Heritage minister Steven Guilbeault — is eager to pass legislation to “get money from the web giants” and their primary justification is the claim that Canadian TV and movie funding has been shrinking. As Michael Geist explains, that’s a pants-on-fire lie:

CMPA Profile – Financing, Sources: CMPA Profile 2019, 2016, 2013

Canadian Heritage Minister Steven Guilbeault has said that his top legislative priority is to “get money from web giants.” While much of the attention has focused on his ill-advised plan to require Facebook to obtain licences for linking to news articles, his first legislative step is likely to target Internet streamers such as Netflix, Amazon and Disney with new requirements to fund Canadian content and to increase its “discoverability” by making it more prominent for subscribers. Based on his comments at several town halls, Guilbeault is likely to also create new incentives for supporting indigenous and persons of colour in the sector with a bonus for those investments (potentially treating $1 of investment as $1.50 for the purposes of meeting Cancon spending requirements). Much of the actual implementation will fall to the CRTC, which will be granted significant new regulatory powers and targeted with a policy direction.

Guilbeault’s case for establishing new mandated payments is premised on the claim that support for the film and television sector is declining due to the emergence of Internet streaming services, which have resulted in decreased revenues for the conventional broadcast sector and therefore lower contributions to Cancon creation. In fact, Guilbeault recently told Le Devoir that without taking action there would be a billion dollar deficit in support in the next three years. He says that his objective is to actually generate a few hundred million more per year in local production by the Internet streamers. In other words, he’s expecting roughly $2 billion in new investment over three years in Cancon from U.S. entities due to his planned regulations (moving from a billion dollar deficit to a billion dollars in extra spending).

While Guilbeault frames these regulatory requirements as a matter of fairness and “rebalancing”, industry data over the past decade tell a much different story. Indeed, there has been record setting film and television production in recent years, much of it supported by companies such as Netflix. CRTC chair Ian Scott last year said that Netflix is “probably the biggest single contributor to the [Canadian] production sector today.” While that is not entirely true – the data suggests that Canadian taxpayers are the biggest contributor with federal and provincial tax credits consistently the largest source of financing – the claim that there is a billion dollar deficit coming or that foreign streamers do not contribute to film and television production in Canada without a regulatory requirement is simply false.

September 30, 2020

The feds go trampling all over provincial responsibilities again

Filed under: Cancon, Government, Health, Law — Tags: , , , — Nicholas @ 03:00

Ted Campbell suggests that even a cursory reading of the constitution does not give the federal government the power to trespass (again) in what is clearly, legally, a provincial government area of responsibility:

“The Fathers of Confederation”
The original painting by Robert Harris (1884) was destroyed in the 1916 Parliament Building fire, and this image for the “Gallery of Canadian History” series of lithographs by Confederation Life Insurance Company is based on a photograph by James Ashfield (1885).
Libraries and Archives Canada item ID number 3013194. http://central.bac-lac.gc.ca/.redirect?app=fonandcol&id=3013194&lang=eng

[T]he Parliament of Canada should look to §91. Here is what the Constitution says are the areas of national government’s concern: The Public Debt and Property; The Regulation of Trade and Commerce; Unemployment insurance; The raising of Money by any Mode or System of Taxation; The borrowing of Money on the Public Credit; Postal Service; The Census and Statistics; Militia, Military and Naval Service, and Defence; The fixing of and providing for the Salaries and Allowances of Civil and other Officers of the Government of Canada; Beacons, Buoys, Lighthouses, and Sable Island; Navigation and Shipping; Quarantine and the Establishment and Maintenance of Marine Hospitals; Sea Coast and Inland Fisheries; Ferries between a Province and any British or Foreign Country or between Two Provinces; Currency and Coinage; Banking, Incorporation of Banks, and the Issue of Paper Money; Savings Banks; Weights and Measures; Bills of Exchange and Promissory Notes; Interest; Legal Tender; Bankruptcy and Insolvency; Patents of Invention and Discovery; Copyrights; Indians, and Lands reserved for the Indians; Naturalization and Aliens; Marriage and Divorce; The Criminal Law, except the Constitution of Courts of Criminal Jurisdiction, but including the Procedure in Criminal Matters; The Establishment, Maintenance, and Management of Penitentiaries; and Such Classes of Subjects as are expressly excepted in the Enumeration of the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces.

In that looooong list I can find more than adequate justifications for ministers and government departments that are responsible for: finance and revenue; industry, trade, and commerce; defence; foreign affairs; transport; fisheries and oceans; citizenship and immigration; health; and for independent agencies like the Bank of Canada, Canada Post and Statistics Canada. I cannot find anything that says we need a Minister for Women and Gender Equality, nor one for Diversity, Inclusion and Youth nor, especially, Ministers for Canadian Heritage and Middle Class Prosperity.

A lot of things have changed since 1867; the telegraph was still fairly new and innovative, a practical telephone wouldn’t be invented until ten years after confederation and the first useful long-haul radio transmission and reception, from Britain to Signal Hill in St John’s didn’t come until the dawn of the 20th century, thus ideas like the CBC, the Internet, Netflix, air traffic control and the North Warning System were far beyond the imagination of the men ~ they were pretty much all men, working in government, back in the 1860s, weren’t they? ~ who drafted the Canadian Constitution.

What was clear to them, based on the United States experiences, was that §90 to §95 which spell out “who does what to whom” were important to the functioning of a federal state, especially to one in which traditional provincial rights and diverse cultures were well established. Now, it is important to remember that in Canada’s long and rich history there were instances, especially during great wars, when the provinces agreed to federal intrusions into their areas of responsibility; this is not one long story of federal bullying. But what seems perfectly clear to me ~ and I suspect to e.g. John Horgan, Jason Kenney, Doug Ford, François Legault and the other premiers is that last week’s Throne Speech marks another major and quite unjustified federal assault on their jurisdictions. What’s happened, according to Manitoba Premier Brian Pallister, is that the provinces have all the health care delivery problems but, thanks, in some part, to tax decisions made in 1942, the feds have all the money. The solution is blindingly obvious: transfer tax “points” as some experts call them, to the provinces so that they, not Justin Trudeau, who have the problems of too few physicians, too few nurses and too few hospital beds also have the money to solve them.

September 23, 2020

Federal minister admits the Libranos’ plan is a shakedown to “get money from web giants”

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

Michael Geist on a rare moment of honesty from Canadian Heritage Minister Steven Guilbeault on the federal government’s atrocity of an internet regulation plan:

Canadian Heritage Minister Steven Guilbeault, 3 February 2020.
Screencapture from CPAC video.

As Canadian Heritage Minister Steven Guilbeault prepares an Internet regulation plan that features the prospect of licences for linking, undermining net neutrality, and trade sanctions, he has typically argued that “it’s about fairness”, suggesting that foreign companies unfairly benefit from the Canadian market at the expense of domestic companies. Yet when Guilbeault appeared at a production sector town hall last week, he was far more candid. Guilbeault told the sector that in a minority government situation, his department had to choose between a massive bill changing “everything under the sun” or to slice it up into smaller pieces. Having chosen the piecemeal approach, Guilbeault pointed to his top priority: get money from the foreign Internet companies (his exact words at 47:58 were “the most pressing thing we needed to do was to get oxygen into the system, which is money. And go and get that money where that money is. Which is web giants.”)

In certain respects, the acknowledgement that this amounts to little more than a shakedown makes sense. CRTC Chair Ian Scott has said that Netflix is now probably the largest contributor to film and television production in Canada and the sector enjoyed record production numbers pre-COVID-19, so the data simply does not support claims that the streamers are hurting the industry. As for the news sector, the Minister has failed to deliver millions in promised tax credits and seemingly now wants an alternative that involves creating a licensing regime for linking to content.

Yet if the goal is simply a matter of wanting more money from Internet companies that can be used to support Canadian cultural policies, it is not clear why this is a matter for the Heritage Minister. Everyone wants more money from the Internet companies and countries around the world have a credible argument that the huge global Internet revenues should be more equitably apportioned among them. In other words, the way to “get money from web giants” is for Finance Minister Chrystia Freeland to tax them on their revenues. Those tax revenues would go into general tax revenues and can be spent in an transparent manner without the need for specialized subsidy programs. This isn’t easy. The U.S. unsurprisingly objects to a potential reduction in its tax revenues, which means that Canada must find allies with other countries in seeking global solutions on tax. Further, Guilbeault candidly recently told a publisher town hall that changes to the tax code is far more difficult than direct program spending.

The problem with Guilbeault’s preference for direct program spending subsidized by Internet companies is that it raises a host of complications and negative effects. For example, mandated Canadian content spending for companies such as Netflix could require the companies to pay into a fund that supports Canadian content production. However, the current rules make it challenging for those same companies to access those funds for their own productions. That leads to either a trade challenge (and the possibility of tariffs against key Canadian sectors such as dairy and steel) for being forced to pay into a system that is inaccessible to foreign providers or a reform to the system that would open things up to foreign providers and in the process undermine the competitiveness of domestic producers and broadcasters who are more reliant on tax credits and funding programs.

September 11, 2020

Canadian government heading toward “the worst of all worlds on Internet regulation”

Filed under: Business, Cancon, Government, Media — Tags: , , , , — Nicholas @ 05:00

Michael Geist on the bull-headed determination of the Canadian federal government — and specifically Heritage Minister Steven Guilbeault — to “solve” a problem by introducing savagely anti-consumer internet regulations:

Canadian Heritage Minister Steven Guilbeault, 3 February 2020.
Screencapure from CPAC video.

The harm that will come from these policy choices is difficult to overstate. By focusing the tax burden on sales taxes rather than technology company revenues, consumer costs will go up and the company profits will be left untouched. The CRTC powers will lead to years of hearings and follow-on litigation, yielding few tangible benefits for creators. The mandated Cancon contributions will spark trade wars and make Canada a less attractive market for new services leading to fewer choices and less competition, while the link licensing requirement will result in blocked sharing of news articles on social media sites that hurts both Canadians and media organizations. All the while, the issues that really matter – privacy, anti-competitive behaviour, online hate, misinformation, a fair share of tech corporate profits – are left largely untouched.

How did the government end up with the worst of all worlds on Internet regulation?

The starting point was the 2015 election in which it committed to no new Netflix taxes (prompted by a Conservative pledge on the issue) and subsequent consultations on everything from copyright to digital cultural policy. The result was then-Heritage Minister Melanie Joly struggling to honour the no-tax commitment, while satisfying increasingly vocal demands from some stakeholders for one. Those calls increased after the results of her cultural policy consultation were released, which largely focused on a rejection of new Internet taxes and support for net neutrality.

In the aftermath of the Cambridge Analytica scandal, worries about Russian election interference, and Christchurch massacre broadcast live online, the policy winds shifted and the government was clearly looking to become more active on the Internet regulation file. That led to Election Act provisions that were generally viewed as successful. It also paved the way for a 2019 election platform that was far aggressive on social media and the Internet, with commitments to address everything from privacy to hate speech online.

[…]

If the government were to address the real concerns, there would be long-overdue privacy reforms, a more aggressive approach on competition issues, measures to address online hate and misinformation, and pursuit of a global agreement on fair taxation of technology company revenues. If it wants to support increased film production from indigenous groups or help the news sector, it can make those policy choices and use general tax revenues without creating a massive regulatory infrastructure.

Instead, it is turning to the harmful policies noted above that raise consumer costs (digital sales taxes), regulate online Cancon with mandated spending requirements (even though the industry has record production led by Netflix), dispense with any pretense of maintaining net neutrality, lead to blocked sharing of news articles (mandated licence for social media sites merely for linking to news content), and result in services avoiding the Canadian market (market interference in payments from services such as Spotify). Much of this will be overseen by the newly empowered CRTC, leading to lengthy hearings that primarily benefit lawyers. After having badly mishandled Canadian digital policy, the government now seems content to take a pass on the important issues and leave the controversial non-issues to the regulator and the courts.

September 5, 2020

Beginning the transition from personal rule to the modern bureaucratic state

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

Anton Howes discusses some of the issues late Medieval rulers had which in some ways began the ascendency of our modern nation state with omnipresent bureaucratic oversight of everyone and everything:

… the bureaucratic state of today, with its officials involving themselves with every aspect of modern life, is a relatively recent invention. In a world without bureaucracy, when state capacity was relatively lacking, it’s difficult to see what other options monarchs would have had. Suppose yourself transported to the throne of England in 1500, and crowned monarch. Once you bored of the novelty and luxuries of being head of state, you might become concerned about the lot of the common man and woman. Yet even if you wanted to create a healthcare system, or make education free and universal to all children, or even create a police force (London didn’t get one until 1829, and the rest of the country not til much later), there is absolutely no way you could succeed.

King James I (of England) and VI (of Scotland)
Portrait by Daniel Myrtens, 1621 from the National Portrait Gallery via Wikimedia Commons.

For a start, you would struggle to maintain your hold on power. Fund schools you say? Somebody will have to pay. The nobles? Well, try to tax them — in many European states they were exempt from taxation — and you might quickly lose both your throne and your head. And supposing you do manage to tax them, after miraculously stamping out an insurrection without their support, how would you even begin to go about collecting it? There was simply no central government agency capable of raising it. Working out how much people should pay, chasing up non-payers, and even the physical act of collection, not to mention protecting that treasure once collected, all takes substantial manpower. Not to mention the fact that the collecting agents will likely siphon most of it off to line their own pockets.

[…]

It was not until 1689, when there was a coup, that an incoming ruler allowed the English parliament to sit whenever it pleased. Before that, it was convened only at the whim of the ruler, and dispersed even at the slightest provocation. In 1621, for example, when James I was planning to marry his heir to a Spanish princess, Parliament sent him a petition asserting their right to debate the matter. Upon hearing of it, he called for the official record of parliamentary proceedings, personally ripped out the page with the offending vote, and promptly dissolved the Parliament. The downside, of course, was that James could not then acquire any parliamentary subsidies.

Ruling was thus an intensely personal affair, of making deals and finding ways to circumvent deals you had inherited. Increasing your capabilities as a ruler – state capacity – was thus no easy task, as the typical ruler was stuck in an essentially medieval equilibrium. Imposing a policy costs money, but raising money involves imposing policy. Breaking out of this chicken-and-egg problem took centuries of canny leadership. The rulers who achieved it most would today seem hopelessly corrupt.

To gain extra cash without interference from Parliament, successive monarchs first asserted and then abused their ancient prerogative rights to grant monopolies over trades and industries. They eventually granted them to whomever was willing to pay, establishing monopolies over industries like gambling cards or alehouses under the guise of regulating unsavoury activities. They also sold off knighthoods and titles, and in 1670 Charles II even made a secret deal with the French that he would convert to Catholicism and attack the Protestant Dutch, all in exchange for cash. Anything to not have to call a potentially pesky Parliament. At times, the most effective rulers even resembled mob bosses. Take Elizabeth I’s anger when a cloth-laden merchant fleet bound for an Antwerp fair in 1559 was allowed to depart. Her order to stop them had not arrived in time, thus preventing her from extracting “loans” from the merchants while she still had their goods within her power.

August 10, 2020

FDR’s “New Deal” and the Great Depression

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

The Great Depression began with the collapse of the stock market in 1929 and was made worse by the frantic attempts of President Hoover to fix the problem. Despite the commonly asserted gibe that Hoover tried laissez faire methods to address the economic crisis, he was a dyed-in-the-wool progressive and a life-long control freak (the Smoot-Hawley Tariff Act which devasted world trade was passed in 1930). Franklin D. Roosevelt won the 1932 election by promising to undo Hoover’s economic interventions, yet once in office he turned out to be even more of a control freak than Hoover. His economic and political plans made Hoover’s efforts seem merely a pale shadow.

For newcomers to this issue, “New Deal” is the term used to describe the various policies to expand the size and scope of the federal government adopted by President Franklin Delano Roosevelt (a.k.a., FDR) during the 1930s.

And I’ve previously cited many experts to show that his policies undermined prosperity. Indeed, one of my main complaints is that he doubled down on many of the bad policies adopted by his predecessor, Herbert Hoover.

Let’s revisit the issue today by seeing what some other scholars have written about the New Deal. Let’s start with some analysis from Robert Higgs, a highly regarded economic historian.

    … as many observers claimed at the time, the New Deal did prolong the depression. … FDR and Congress, especially during the congressional sessions of 1933 and 1935, embraced interventionist policies on a wide front. With its bewildering, incoherent mass of new expenditures, taxes, subsidies, regulations, and direct government participation in productive activities, the New Deal created so much confusion, fear, uncertainty, and hostility among businessmen and investors that private investment, and hence overall private economic activity, never recovered enough to restore the high levels of production and employment enjoyed in the 1920s. … the American economy between 1930 and 1940 failed to add anything to its capital stock: net private investment for that eleven-year period totaled minus $3.1 billion. Without capital accumulation, no economy can grow. … If demagoguery were a powerful means of creating prosperity, then FDR might have lifted the country out of the depression in short order. But in 1939, ten years after its onset and six years after the commencement of the New Deal, 9.5 million persons, or 17.2 percent of the labor force, remained officially unemployed.

Writing for the American Institute for Economic Research, Professor Vincent Geloso also finds that FDR’s New Deal hurt rather than helped.

    … let us state clearly what is at stake: did the New Deal halt the slump or did it prolong the Great Depression? … The issue that macroeconomists tend to consider is whether the rebound was fast enough to return to the trendline. … The … figure below shows the observed GDP per capita between 1929 and 1939 expressed as the ratio of what GDP per capita would have been like had it continued at the trend of growth between 1865 and 1929. On that graph, a ratio of 1 implies that actual GDP is equal to what the trend line predicts. … As can be seen, by 1939, the United States was nowhere near the trendline. … Most of the economic historians who have written on the topic agree that the recovery was weak by all standards and paled in comparison with what was observed elsewhere. … there is also a wide level of agreement that other policies lengthened the depression. The one to receive the most flak from economic historians is the National Industrial Recovery Act (NIRA). … In essence, it constituted a piece of legislation that encouraged cartelization. By definition, this would reduce output and increase prices. As such, it is often accused of having delayed recovery. … other sets of policies (such as the Agricultural Adjustment Act, the National Labor Relations Act and the National Industrial Recovery Act) … were very probably counterproductive.

Here’s one of the charts from his article, which shows that the economy never recovered lost output during the 1930s.

August 9, 2020

QotD: The economic concept of “revealed preferences”

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

Economists have a handy term called “revealed preferences”. In colloquial English it means “look at what people do, not what they say, and certainly never take notice of what they say others should do”.

Now, you can’t help but notice that there is a disparity between those who say that taxes should be higher and those who act as if they should be. Clearly, an individual who really believes that the Government is more effective at spending his money would voluntarily offer up more than the legal minimum of taxation. That we have fewer people acting in this manner than are to be found writing columns and making speeches calling for higher taxation shows a certain gap, does it not, between public utterances and private actions? Why, we could make such donations a litmus test for those believers in higher taxation and state spending who want to compel all of us to pay more. Only those who show their commitment by sending a cheque to the Treasury should be treated seriously.

Cheques, by the way, should be made out to “The Accountant, HM Treasury”, and sent to 1 Horse Guards Road, London SW1A 2HQ. A 2nd-class stamp is sufficient and you are encouraged to add a covering note so that your donation is spent in the way you like.

Tim Worstall, “Show us your cheques”, Times of London, quoted in Continental Telegraph, 2020-05-07.

July 28, 2020

QotD: Incentives and opportunity costs

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

The first and most important thing in all economics is that incentives matter. If you can grasp that and also get to grips with the second, that there are always opportunity costs, then you’re going to be doing better than 90% of the economics profession itself. But do remember that incentives matter, incentives really, really, matter. Changes in tax law have stopped people from dying for example.

No, really, there was one of those natural experiments, when inheritance tax laws changed at the end of the year. There was a definite blip downwards in the death rate of people rich enough to pay inheritance tax at the end of the year, a corresponding one upwards again as the new, lower, rates came into effect in January. Incentives really, really, matter.

Tim Worstall, “What’s The Over And Under On Tesla’s 200,000th Car Being Delivered On July 1?”, Continental Telegraph, 2019-05-03.

July 22, 2020

QotD: Urban decline

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

At the heart of big-city exoduses is a process that I call accumulative decay. When schools are rotten and unsafe, neighborhoods become run-down and unsafe, and city services decline, the first people to leave are those who care the most about good schools and neighborhood amenities and have the resources to move. As a result, cities lose their best and ablest people first. Those who leave the city for greener pastures tend to be replaced by people who don’t care so much about schools and neighborhood amenities or people who do care but don’t have the means to move anywhere else. Because the “best” people — those who put more into the city’s coffer than they take out in services — leave, politicians must raise taxes and/or permit city services to deteriorate. This sets up the conditions for the next round of people who can do better to leave. Businesses — which depend on these people, either as employees or as customers — also begin to leave. The typical political response to a declining tax base is to raise taxes even more and hence create incentives for more businesses and residents to leave. Of course, there’s also mayoral begging for federal and state bailouts. Once started, there is little to stop the city’s downward spiral.

Intelligent mayors could prevent, halt and perhaps reverse their city decline by paying more attention to efficiency than equity. That might be politically difficult. Regardless of any other goal, mayors must recognize that their first order of business is to retain what economists call net positive fiscal residue. That’s a fancy term for keeping those people in the city who put more into the city’s coffers, in the form of taxes, than they take out in services. To do that might require discrimination in the provision of city services — e.g., providing better street lighting, greater safety, nicer libraries, better schools and other amenities in more affluent neighborhoods.

As one example, many middle-class families leave cities because of poor school quality. Mayors and others who care about the viability of a city should support school vouchers. That way, parents who stay — and put a high premium on the education of their children — wouldn’t be faced with paying twice in order for their kids to get a good education, through property taxes and private school tuition. Some might protest that city service discrimination is unfair. I might agree, but it’s even more unfair for cities, once the magnets of opportunities for low-income people, to become economic wastelands.

Walter E. Williams, “A Mayor’s Most Important Job”, Townhall, 2018-04-18.

July 15, 2020

Donald Shoup, the “Sir Isaac Newton of parking” or an “‘academic bottom-feeder’ who found a wonderful, rich ecological niche down there in the depths”

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

Colby Cosh, after taunting Ontarians yet again over our just-barely-past-Prohibition views on alcohol in public places, goes on to praise the work of UCLA economist Donald Shoup and his insights into the economics of parking:

Parking — boring topic, ain’t it? Shoup latched onto it as a young-ish man because he was a follower of Henry George (1839-1897), the intriguing “single tax” economic theorist of the 19th century. George favoured a tax on the unimproved value of land parcels as a way of socializing pure rent (the value earned from occupying a mere location) and encouraging development. It is a concept that many economists still like, although it is potentially difficult to apply at scale. The widely used concept of tax increment financing is one example of Georgism in practice.

Shoup started out trying to fit parking spaces into the Georgist picture, but the boring topic was so underexamined that he found himself having to build a general theory of parking. He quantified the relationship between parking and traffic, finding that people “cruising” for parking spots were more destructive than anyone had imagined, and he inspired waves of research into the hidden market values of parking spots, which are rarely bought or sold in their own right. He happily describes himself as an “academic bottom-feeder” who found a wonderful, rich ecological niche down there in the depths.

Shoup has spent decades travelling the world and preaching against the concept of free parking, often meeting with bad-tempered resistance. Nevertheless, he has made a lot of headway in the world of urban planning. Any economist can see immediately how bundling a “free” parking space with an apartment or a job might be inefficient. The renter or homeowner has to pay a hidden extra cost for an amenity he might not choose to use, and the commuter is being given an incentive to drive to work — an incentive whose cash value he might prefer to keep. Shoup soon found, on empirical investigation, that most urban parking lots show signs of less-than-optimum use.

[…]

Of course, too little parking is as much of an efficiency problem as too much, which is why Shoup and his followers want parking to be priced wherever possible: if more is really needed, let a market create it. (To my eyes he has at least as much Hayek in him as Henry George.) In the era of Uber and smartphones, it is a lot easier to imagine a fully Shoupista world in which prices for parking spots update in real time and drivers look up prices at or near their destination before setting out.

June 30, 2020

In the final analysis, there is only one taxpayer – you

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

Ted Campbell comes out in favour of some form of negative income tax for Canada:

Cartoon that appeared with Michael K. Spencer’s article “Is Universal Basic Income really a solution?” at https://medium.com/@Michael_Spencer/is-universal-basic-income-really-a-solution-c0d6d95f100e

My first and, I believe, the most important thing to understand about taxes is: there is only one taxpayer; it is you and me and individuals like us. Corporations do not pay taxes ~ they pass every single penny of the taxes assessed to them on to us, their customers. You and I and your and my family and friends pay 100% of all corporate taxes.

A tax on income is a tax on savings which is, in turn, a tax on investment which means it is a tax on jobs.

Flate rate taxes are unfair to the poor, but progressive income taxes, while fairer, take money away from investment in jobs.

Consumption taxes (sales taxes and the HST/GST) are, to some extent, voluntary: consume less and you pay less in taxes. Where consumption is not discretionary ~ say on food ~ the tax system may be used to make consumption taxes at least somewhat progressive.

Corporate taxes ~ ALL corporate taxes ~ are just consumption taxes that are collected in an inefficient and expensive manner. It would be much, much better tax policy to raise the federal GST by 1 or 2 points and cancel ALL corporate taxes. Having a zero federal corporate tax rate would make Canada a much, much more attractive place in which to do business; companies would want to open plants and offices here ~ meaning more, new, good jobs for Canadians.

Income taxes have far too many exceptions and exemptions and deductions and so on. Federal income taxes should be clear and simple and the Canada Revenue Agency should be able to automatically provide a tax bill to about 98% of Canadians. That may mean a thorough (and time-consuming and politically unpopular) overhaul of the complete tax system.

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