My word, you mean competition actually works?

Well, would you look at that! Apparently competition works to the benefit of consumers! Who could have possibly predicted that outcome?

Shop prices fell at the steepest rate for at least eight years last month as the popularity of discount stores among the middle classes helped to drive down the cost of clothing and consumer goods.

The overall price of items at the till fell by 1.8 per cent compared with June last year, with the price of clothes down by 13.7 per cent year-on-year.

The figures, compiled by the British Retail Consortium/Nielsen shop price index, show the fastest drop in prices since the trade association began compiling data in 2006.

It was also the 14th month in a row in which shop prices fell, easing the pressure on households where wage-earners have suffered pay freezes.

Yes, of course, the capitalists are straining every sinew to increase the profits that they make from our need for basic necessities such as food and drink. But in doing so they find themselves competing with other capitalists who would also like to like that pelf from our pockets. That competition then limiting the amount any one shop can charge and finally leading to falling prices for consumers.

Of course, a number of people have pointed this out before, starting with Adam Smith, Bastiat had things to say on the point and even Karl Marx got it. Monopoly capitalism is to be avoided for it is without that competition, for it is that market choice that makes such a system work to the benefit of consumers.

This is all obvious to us, the initiates, of course. But we need to continue to make a song and dance about it. Yes, there really are things that governments must do that cannot be done by other actors. Yes, there really are times that said government must intervene in the economy. But for the most part that intervention necessary is simply to ensure that competition is possible.

It’s not necessary to ensure that competition is happening, only that it can. For a monopolist in possession of a contestable monopoly is unable to exploit that monopoly for fear of competition arising to contest it. It’s not even necessary to have a level or even playing field, only to have an open one.

Worth noting the next time someone starts to complain about the monopoly of the supermarkets (as they do every few years, prompting yet another enquiry). Precisely because competition is forcing prices down we’ve obviously not got an exploitable monopoly here.

So just what is slow economic growth then?

This is slightly worrying:

Just how difficult this has become was shown last week when the OECD released its predictions for the world economy until 2060. These are that growth will slow to around two-thirds its current rate; that inequality will increase massively; and that there is a big risk that climate change will make things worse. Despite all this, says the OECD, the world will be four times richer, more productive, more globalised and more highly educated. If you are struggling to rationalise the two halves of that prediction then don’t worry – so are some of the best-qualified economists on earth.

World growth will slow to 2.7%, says the Paris-based thinktank, because the catch-up effects boosting growth in the developing world – population growth, education, urbanisation – will peter out. Even before that happens, near-stagnation in advanced economies means a long-term global average over the next 50 years of just 3% growth, which is low. The growth of high-skilled jobs and the automation of medium-skilled jobs means, on the central projection, that inequality will rise by 30%.

Not the predictions themselves, which come from this OECD report, but the interpretation that is put upon them. For it appears that Paul Mason, supposedly one of those employed to explain the world to us, is incapable of actually reading a report.

On the inequality point he’s missed the crucial qualifier: “in-country” inequality. The report is actually telling us that the currently poor countries are going to catch up with the currently rich ones and that when they do, when they join us at the technological frontier, then their growth will be lower than it is during the current catch up phase.

That is, the prediction is that the vast gulfs of inequality between those living on a $1 a day and ourselves will be closed: yet Mason is concerning himself with that trivial 30% rise in inequality amongst ourselves, the already rich. It’s absurd to be worrying that in-country gini will rise from, say, 0.30 to 0.39 while not celebrating the collapse of the global gini from 0.80 to 0.40 (made up numbers just for illustration). At least it’s absurd if inequality is one of those things that you want to worry about.

There’s another misunderstanding there, one which anyone who has actually read Piketty should understand for he explains it very well. Gross GDP growth, the size of the entire economy, is driven by two different things. One is the expansion of the population that is producing that GDP. The other is the efficiency with which each person is contributing to that GDP. The report is stating that the entire globe is just about to finish going through the demographic transition, as the UN and everyone else assumes it is. Thus population growth will not be contributing to growth after some few decades of the future.

3% (or 2.7%) growth without the demographic effect is not low or slow growth: this is fast growth. The economy doubles every 25 years or so but over the same number of people meaning that per capita GDP doubles every 25 years. This is not an historically slow level of per capita GDP growth. This is actually rather fast.

It’s not the specific predictions that worry at all: it’s that someone supposedly employed to explain such matters to us doesn’t seem to understand the points being made. How did we end up in this situation?

One of the upsides of having a global elite is that at least they know what’s going on. We, the deluded masses, may have to wait for decades to find out who the paedophiles in high places are; and which banks are criminal, or bust. But the elite are supposed to know in real time – and on that basis to make accurate predictions.

Well, yes, quite.

Voxplainer on Scott Sumner & market monetarism

I have to admit that I usually dislike Vox. The twitter parody account Vaux News gets it kinda right in my opinion—they manage to turn anything into a centre-left talking point—and from the very beginning traded on their supposedly neutral image to write unbelievably loaded “explainer” articles in many areas. They have also written complete nonsense.

But they have some really smart and talented authors, and one of those is Timothy B. Lee, who has just written an explainer of all things market monetarism, Prof. Scott Sumner, and nominal GDP targeting. Blog readers may remember that only a few weeks ago Scott gave a barnstorming Adam Smith Lecture (see it on youtube here). Readers may also know that I am rather obsessed with this particular issue myself.*

So I’m extremely happy to say that the article is great. Some excerpts:

Market monetarism builds on monetarism, a school of thought that emerged in the 20th century. Its most famous advocate was Nobel prize winner Milton Friedman. Market monetarists and classic monetarists agree that monetary policy is extremely powerful. Friedman famously argued that excessively tight monetary policy caused the Great Depression. Sumner makes the same argument about the Great Recession. Market monetarists have borrowed many monetarist ideas and see themselves as heirs to the monetarist tradition.

But Sumner placed a much greater emphasis than Friedman on the importance of market expectations — the “market” part of market monetarism. Friedman thought central banks should expand the money supply at a pre-determined rate and do little else. In contrast, Sumner and other market monetarists argue that the Fed should set a target for long-term growth of national output and commit to do whatever it takes to keep the economy on that trajectory. In Sumner’s view, what a central bank says about its future actions is just as important as what it does.


In 2011, the concept of nominal GDP targeting attracted a wave of influential endorsements:

Michael Woodford, a widely respected monetary economist who wrote a leading monetary economics textbook, endorsed NGDP targeting at a monetary policy conference in September.

The next month, Christina Romer wrote a New York Times op-ed calling for the Fed to “begin targeting the path of nominal gross domestic product.” Romer is widely respected in the economics profession and chaired President Obama’s Council of Economic Advisors during the first two years of his administration.

Also in October, Jan Hatzius, the chief economist of Goldman Sachs, endorsed NGDP targeting. He wrote that the effectiveness of the policy “depends critically on the credibility of the Fed’s commitment” — a key part of Sumner’s argument.

But read the whole thing, as they say.

*[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16]

Lost and loster

“So you’re telling me there’s a chance!” That is Jim Carrey’s reaction, in Dumb and Dumber, when the lady he fancies tells him his chances are like one out of a million. (The 33-second clip is here.)

You’ve got to admire such optimism. May we classical liberals find it when we ponder the chances of seeing a turn toward classical liberalism.

The prospects are enhanced by understanding the situation. But currently we are still stuck in the ruts that were worn into our culture from 1880. A hard look at the period 1880-1940 might inspire, not a comedy, but a tragedy: Sad and Sadder.

But there’s still a chance, so chin up. At the end of Dumb and Dumber, Carrey does not get the girl, but he and his friend carry on in good cheer.

Our movie would be called Lost and Loster. “Lost” not as in “lost cause,” but as in “lost children.” Our civilization has gone astray and is now bewildered as to place and direction. That is the theme of the new website, Lost Language, Lost Liberalism, nicknamed 4L.

With governmentalization on autopilot, with the center-left dominating much of the media, schooling, academia, and other cultural institutions, with the entrenchment of government as big, suffocating player, it is no surprise that many people who fancy themselves “liberal” are doing some soul searching. Edmund Fawcett’s 2014 book Liberalism: The Life of an Idea demonstrates such soul searching, if not soul finding.

What makes a liberal? To answer that question, it is good to learn about how the term “liberal” first arose as a political term. Here, think Adam Smith (as I explain here). Then, we also need to understand how from 1880 the meaning shifted—the theme of Lost Language, Lost Liberalism – 4L.

4L shows that English-language discourse underwent a watershed change during the period 1880-1940. 4L studies the changes in the meaning of words, and suggests that these changes played an important role in the decline of classical liberalism. Ten central words are treated: liberal(ism), liberty, freedom, justice, property, contract, equality, equity, law, and rights.

Compendia of quotations show the debate over the meaning of each word. The site also features other forms of evidence, including ngrams and copious testimony about generational shifts.

I am honored that the Adam Smith Institute has chosen to partner on the project; the Press Release from ASI can be found here.

The chances of recovering Adam Smith liberalism depend on understanding the course of the past 250 years. The 1880-1940 act is especially sad and casts a long shadow. But there is still hope that we’ll find our way to the true path of liberalism.

Did you know that the public health campaigners are complete loons?

Well, if you didn’t know that the public health campaigners are complete loons then perhaps this will help to persuade you. The European Union is taking the next step in reforming the entirely absurd sugar regime, making it marginally less awful. The public health wallahs are shouting that this might make sugar cheaper, to the point where everyone will explode from eating too much of it.

No, really:

Controversial agricultural reforms by the European Union could cause sugar levels in food and drink to rise, experts have warned.

Campaigners said it was “perverse” that the EU was planning to lift sugar production quotas at a time when health authorities are advising people to reduce their consumption of the ingredient.

Under the current system production of sugar within the EU is restricted to 13.3 million tonnes a year. However the quota is due to be scrapped in 2017 as part of a series of reforms to the Common Agricultural Policy.

The move is expected to make sugar cheaper for food and drink manufacturers, prompting fears it will encourage them to use rising levels of the ingredient. Dr Aseem Malhotra, science director of Action on Sugar, a campaign group, said it would be “disastrous” for public health.

Oh dear.

They’ve really not understood what’s going on here at all.

In the nightmare world of EU agricultural policies the abolition of quota does not mean that prices are going to fall. For what actually happens is that if you grow sugar beet then there’s two prices which you can sell that deformed mangelwurzel to the processor at. One, a guaranteed one, much higher than a free market price, is only available if you have quota to go with your sugar beet. The other price is very much lower than a free market price and almost no one ever tries to grow beet without quota as a result.

The important point about the abolition of quota is not that it abolishes quota. It is that if there is no quota then beet with or without quota cannot gain that guaranteed price. Thus the price on offer to Europe’s sugar beet growers is going to fall: all other things being equal we’ll thus have less beet being grown. And thus less sugar being taken into storage and then subsidised by the EU when it is later dumped on the food manufacturers.

The abolition of quota will lead to less sugar being produced. And the public health campaigners are arguing against the abolition of quota to stop less sugar being produced.

Go figure.