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"Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice" - Adam Smith

Disqus or Wordpress for comments? Let us know

Written by Sam Bowman | Monday 10 March 2014

We're going to be moving over to a new, Wordpress-based site shortly. One of the things we're trying to decide is whether to keep Disqus for comments, or to use a native Wordpress-based comments system.

As I see it, the issues are this:

  1. Wordpress is simpler, requiring no login or registration. Disqus does allow guest comments but it can be quite fiddly.
  2. Disqus allows users to upvote their favourite comments and downvote others.
  3. All our current comments are kept on Disqus, though I'm not sure if we'll be able to bring these over in any case.
  4. Some users find Disqus to be extremely annoying to use; whether this is a specific Disqus problem or a more general problem I don't know.

Since ASI writers very seldom comment on the site, preferring to allow readers to discus among themselves (maybe that should change?), I thought the best thing to do would be to open it up to you — do you like Disqus? Hate it? Which would make you happier — the status quo, or a Wordpress-powered comment system? Let us know in the comments. Of course, the fact that those comments are currently powered by Disqus may skew the results...

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Five intriguing papers I discovered this week

Written by Ben Southwood | Friday 07 March 2014

In what might become a recurring feature, I am going to summarise the findings of a few research papers, potentially of interest to ASI blog readers, that were either first released this week, first published this week, or first come upon by me this week.

1. Fernandes, D., Lynch, J. G., and Netemeyer, R. G., "Financial Literacy, Financial Education and Downstream Financial Behaviors" (Jan 2014)

This paper is a large meta-analysis of 168 other papers, which in turn refer to 201 different studies and experiments. They find that at least 99.9% of financial behaviour in life cannot be explained by differences in financial education, or conversely at most 0.1% of the difference in people's financial decision-making and choices is down to education interventions designed to improve their financial literacy. In the words of their abstract: "even large interventions with many hours of instruction have negligible effects on behavior 20 months or more from the time of intervention".

While other correlational studies appear to show some relationship between financial behaviour and educational schemes (i.e. one explaining more than 0.1% of the variance between individuals) they explain that this is only because those typically getting financial education already have various psychological traits associated with careful management of finances. They therefore suggest that big schemes designed to improve lifetime financial decisionmaking are futile and a waste of money; the best we can hope for is "just in time" interventions, perhaps at the point of financial transactions, that are more likely to be taken in and not forgotten.

2. Wang, M-T., Eccles, J. S., and Kenny, S., "Not Lack of Ability but More Choice: Individual and Gender Differences in Choice of Careers in Science, Technology, Engineering, and Mathematics" (May 2013)

In this paper the authors find that a substantial fraction of the male-female "gap" in STEM (Science, Technology, Engineering and Medicine) fields can be explained by the fact that women who are talented at maths tend to also have high verbal skills, skills that mathematically talented men are much more likely to lack. This means they have a wider range of choices available to them, and also possibly identify less closely with maths as part of their personality, and it is this choice not to pursue STEM further that drives the gap, rather than, for example, discrimination in the area or a perceived unfriendly atmosphere.

3. Liu, S., Huang, J. L., and Wang, M., "Effectiveness of Job Search Interventions: A Meta-Analytic Review" (Mar 2014)

Liu, Huang and Wang found, reviewing 47 different experiments testing if schemes "teaching job search skills, improving self-presentation, boosting self-efficacy, encouraging proactivity, promoting goal setting, and enlisting social support" could boost the unemployed's chances of getting a job. In fact, on average those in the treatment groups—i.e. those actually subject to the intervention, and not in the control group—were 2.67 times more likely to get a job. Since the studies all used randomness of quasi-randomness to assign treatment, this suggests, they say, that schemes that develop skills and self-motivation can be effective. However, the schemes were more likely to help the young than the old, the short-term unemployed than the long-term unemployed, and job-seekers with special needs, as compared to the population at large.

4. Karwowski, M., and Lebuda, I., "Digit ratio predicts eminence of Polish actor" (Jul 2014)

In a slightly surprising study, the two authors looked at 98 Polish actors, both male and female, and compared the ratio between their second and fourth digits on their hand (a measure of prenatal testosterone exposure) and their productivity and fame. For both men and women, even controlling for age, a higher ratio predicted more pre-eminence.

5. Aisen, A., and Veiga, F. J., "How Does Political Instability Affect Economic Growth?" (Jan 2011)

In a classic example where economists do extensive research to tell us what we already know, this IMF paper from 2011 shows us how bad political instability is for economic growth. Actually, the paper is a great one because it allows us to estimate the size of the impact of different political elements on instability and then the size of instability's own impact on economic aggregates.

Their findings are highly interesting: whereas primary school enrolment has a pitifully small impact on economic growth, and the impact of investment, economic freedom and the security of property rights comes out quite small, violence, political instability and cabinet changes have substantial negative effects, as does, surprisingly, population growth. And while the most productive regions in Europe are the most ethnically diverse, in this study ethnic homogeneity is very strongly associated with growth. Of course, the conclusions of the paper—that countries should address the root causes of political instability—are much easier said than done!

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Think piece: cryptocurrency gets real

Written by Blog Editor | Tuesday 18 February 2014

ASI fellow Preston Byrne explains why bitcoin's recent problems do not mean the cryptocurrency-cum-payments-system is over. In fact, the promise of cryptography in payments and contracts is as exciting as ever.

Last week was a horrible week for Bitcoin: as "transaction malleability" (in effect, a form of distributed denial of service attack) entered the lexicon, $2.7 million of Bitcoins were stolen from Silk Road 2, Russia banned it and the App Store followed suit, the value of a single Bitcoin fell to roughly half – as against USD – as it was 14 days ago.

One could be forgiven for thinking it is "all over" for cryptocurrency; the sector is more than just Bitcoin, however, and as a whole the market tells a very different story. Slowly but surely, the one-trick crypto pony is becoming a multilateral ecosystem and one of the more interesting of these developments was the establishment of Ethereum, a project to build a platform to run smart contract protocols.

“What the hell is a smart contract?” You ask.

Read more here.

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A lie can be half way around the world before the truth has got its boots on

Written by Tim Worstall | Tuesday 11 February 2014

This is a little story close to my heart in the day job:

"I think there is a great commercial potential on the moon," he added, citing significant reservers of helium 3, which is rare on Earth and which could be developed into a clean energy fuel ideal for nuclear fusion. The lunar soil is also rich in coveted rare earth elements: 17 chemicals in the periodic table that are in an increased demand because they are heavily used in everyday electronics. "There are a vast amount of opportunities for a wide variety of companies not only in America but across the globe," Gold insisted, emphasizing Europe and Japan, as well as the US Congress, are enthusiastic about a return to the moon.

The lunar soil may indeed be rich in rare earths: I have no idea myself but it could be. However, absolutely no one, ever, is going to try and mine rare earths on hte Moon and then return them to Earth. It simply isn't going to happen.

What I think has happened here is that people have absorbed the stories of the past few years about impending shortages of the rare earths. All that stuff about China reducing exports of these metals so vital to modern electronics. And thus there's a feeling that any deposit of them, even somewhere as inaccessible as the surface of the Moon, must be something that people would want to exploit.

The problem is in the initial story: yes, China did limit exports but that does not mean that there's any shortage of these minerals here on out little planet. Several of them, individually, are as common as copper down here. And we produce millions upon millions of tonne of that each year while we use only 140,000 tonnes of all 17 rare earths together. There's simply no long term shortage.

And there's absolutely no way therefore that anyone's going to try and mine the Moon for things that can be had down here for $10 a lb.

My major point here being that these people are apparently basing their plans about lunar mining on something that simply never will be mined up there: at least not for returning down here. And it's inevitable that if you start basing your plans on untruths then your plans are going to fail at some point.

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There was no British housing bubble

Written by Sam Bowman | Friday 17 January 2014

Marcus Nunes graphed the Housing Stock to Population ratio in the US recently, showing that housing reached something like a steady-state in the US from the mid-1980s onwards. As Philip Stephens says, “The constructing in US housing was exactly what was needed to maintain the housing-population ratio in the face of increased population growth. You cannot have an “unsustainable boom” without oversupply.”

This is what the UK looked like over this period (my thanks to Daniel Knowles for the data):

The long-term trend (black dotted line) is attributable to the tendency in recent decades to smaller households, but what’s interesting is that, not only was there no spike in the run-up to 2008, the growth of dwellings over population actually fell below the trend. This is not what we would expect to see if there had been a bubble in housing production.

Dwellings data is a little bit unreliable, though – splitting a house into two flats creates an extra dwelling – so it might be better to look at the amount of new houses that were actually built. Here’s a chart showing the number of residential construction permits granted over the past forty years:

And here’s the ratio of new residential construction permits over population across the same period:

These charts show that housing construction was actually well below historical levels in the 1990s and 2000s, both in absolute terms and relative to population. It is difficult to see how someone could claim that the 2008 bust was caused by too many resources flowing toward housing and subsequently needing time to reallocate if there was no bubble in housing to begin with.

What this suggests is that the Austrian story about the crisis may be wrong in the UK (and, if Nunes’s graphs are right, the US as well). The Hayek-Mises story of boom and bust is not just about rises in the price of housing: it is about malinvestments, or distortions to the structure of production, that come about when relative prices are distorted by credit expansion.

What did cause the crisis? Jeffrey Friedman has shown that bank regulation (most notably, the Basel accords) was one of the major factors that led to the financial crisis, and Robert Hetzel has outlined a convincing theory that central bankers’ tightening of monetary policy in early-to-mid 2008 was the overriding cause of the world’s economic collapse. There is also the possibility that financial investment in the housing market was a simple error.

I was once convinced that the Mises-Hayek story about the boom and bust was true, but the evidence does not seem to bear this out.

Update: A lot of people seem to be implying that Austrian Business Cycle Theory (ABCT) means: Easy money -> high prices ("bubble") -> bubble burst, people lose money. This is incorrect. ABCT relies on distortions to the structure of production (that is, the "real" economy) which have to be liquidated over a period of time following the point at which it becomes clear that they are not good investments. If a 'bubble' just meant that people had lost money it would not cause a long-running recession, it would just mean that overnight a lot of people had lost money (like a stock market crash). The reason the recession takes time according to the ABCT is that resources have been invested in a sector where price signals take a considerable amount of time to adjust after a credit-induced malinvestment bubble and so it takes a while for people to determine which investments are 'mal'.

In short: There may have been a price bubble in British housing market, but there was not the production bubble that ABCT predicts.

PS: I am interested in seeing these data for countries like Ireland and Spain, where the Austrian story may be more valid. It is also possible, as Anton Howes has pointed out, that a regional breakdown would show that there were bubble-like expansions in housing supply in certain parts of the UK, which the country-wide figures hide. If you have these data please let me know, either in the comments or by emailing me at sam@adamsmith.org.

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The twelve days of state bureaucracy: 8-12

Written by Dr Eamonn Butler | Monday 06 January 2014

Day 8

Dearest Grandmama, eight noise abatement officers arrived saying that the noise of my neighbours' protest and the various inspectors' cars coming and going was in clear breach of official guidelines. They served me a compliance notice. I will write more tomorrow.

Day 9

Dearest Grandmama, the au pair and I made the mistake of bringing out tea and cakes in an attempt to make peace with the neighbours, it is the season of good will, after all. Now nine food safety inspectors are here, saying that out kitchen does not comply with hygiene regulations for the provision of food to the public. I will write more tomorrow.

Day 10

Dearest Grandmama, ten Home Office people broke down the door today, saying they suspected that the au pair might have been working here illegally. I've spoken to a lawyer and we hope we can get her out of the detention centre soon. We had the workmen come back to repair and repaint the front door. I will write more tomorrow.

Day 11

Dearest Grandmama, eleven EU inspectors arrived today. We convinced them the au pair was Bulgarian and therefore had a perfect right to be working here, but one of them noticed the name of the house and told us that we had to change it from Green Acres to Green Hectares. They also quizzed us on what colour the front door had been painted. I will write more tomorrow.

Day 12

Dearest Grandmama, today twelve court officers turned up to serve me with a European Arrest Warrant. We had been reported for painting the front door in a colour called Burgundy Red, Unfortunately this name breaches of EU local origin protection regulations. Anyway, I'm in prison myself now in Burgundy, and will have to sell the house, including the partridge and the pear tree, to pay my legal bills.

Still, it was a very kind gift, and at least it has taught me a lot about regulation these days. Please address any future correspondence to my lawyer.

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The twelve days of state bureaucracy: 4-7

Written by Dr Eamonn Butler | Monday 30 December 2013

Day 4

Dearest Grandmama, four Environment Agency officers came round today and said the pear tree was unsafe as it might blow down in a gale. No gales are forecast, but they still say it has to be fenced-off or removed immediately. So we had some builders round to erect a sturdy fence. I will write more tomorrow.

Day 5

Dearest Grandmama, five traffic wardens arrived today, saying the neighbours had been complaining at the number of vehicles that had been calling. They gave tickets out to everyone parked in the street including several neighbours which only made them angrier. I will write more tomorrow.

Day 6

Dearest Grandmama, six security contractors arrived today. The traffic wardens had complained of harassment from the neighbours for giving them tickets so the local council were installing CCTV to ensure a safe working environment for the traffic wardens. I will write more tomorrow.

Day 7

Dearest Grandmama, the floodlights that the CCTV contractors installed really light up the tree and the partridge nicely, but seven of my near neighbours have organised a protest picket outside the house because they cannot sleep at night and the traffic and noise keeps them awake during the day. I will write more tomorrow.

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The twelve days of state bureaucracy: 1-3

Written by Dr Eamonn Butler | Thursday 26 December 2013

Day 1

Dearest Grandmama, we're having a lovely Christmas here at Green Acres, and thank you so much for the wonderful present we opened today, a partridge in a pear tree. I planted the tree and the partridge looks very happy perched in it. I will write more tomorrow.

Day 2

Dearest Grandmama, after I planted the tree, two animal welfare inspectors came round. They wanted to know if you were licensed to trade in game. And apparently just keeping the partridge in a tree would break all sorts of animal welfare rules, so I had to buy a proper bird house for it. I will write more tomorrow.

Day 3

Dearest Grandmama, after I erected the bird house for the partridge, three building inspectors came round saying I needed planning permission. They have given me until Twelfth Night to demolish the bird house, or they will come and bulldoze it. Still, I will have the tree, even if I have nowhere to keep the partridge, so thank you again. I will write more tomorrow.

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Libertarian film screening of V for Vendetta

Written by Blog Editor | Monday 04 November 2013

Tom Stringer has arranged a really fun Monday evening outing on Monday November 4th.  It's a showing of the movie "V for Vendetta" at the Bowler Bar and Pub in Clarkenwell. The screening starts at 7, but people can arrive from 6pm onwards and there'll be plenty of time to chat with fellow libertarians. There's an amply stocked bar and what's more there is a free drink for every attendee courtesy of EzyOrder when you arrive (all you need to do is download their app onto your smartphones).

You can purchase your tickets here.

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Why we've finally joined Google+

Written by Sam Bowman | Wednesday 09 October 2013

We've set up an Adam Smith Institute page on Google+, and — more importantly — a Google+ community for libertarians and classical liberals (and fellow-travellers) to share and discuss ideas and articles they find interesting.

To be honest, I've always been pretty sceptical about Google+. Though I think the functionality is superior to Facebook, it's not better enough to entice people to use it instead. And we have so many fans on Facebook and Twitter that I've always been wary about splitting the audience too much.

So why the change of heart? Two reasons. One, we've wanted to set up a forum for liberty-minded people in the UK to talk about things online for a while. Message boards are unwieldy, and the other social media sites aren't very good at allowing people other than page managers or prominent Tweeters to start discussions that go out to larger audiences. Google+'s communities are remarkably bottom-up: if you want to start a conversation about something in the group, you can.

The second reason is the thing I'm most excited about. Google+'s Hangouts functionality is superb. Hangouts allow us to broadcast live video conversations between up to eight users, with chat contributions from anyone else who wants to take part. The Real Asset Company has done this to great effect. I'm hoping that, if there's enough interest, we can start doing regular online conversations with all sorts of people who it wouldn't be easy to bring to events at the Institute, broadcasting to all the people who can't make it to those events.

If there's anyone you think we should ask to 'Hangout' with, let me know in the comments and we'll see what we can do. In the meantime, join the Google+ community and let's try to get the ball rolling.

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