One thing to be grateful to Donald Trump for

We wouldn’t say that we’re greatly enamoured with Donald Trump’s trade policies but there is a silver lining all the same:

Examining his tariff-hiking, trade-war-inducing approach to international relations, their research shows the claim that it protects manufacturing jobs is… fake news. Far from creating jobs, it has reduced them. Yes, domestic manufacturers get some protection within the US market, but that is more than offset by the fact that they face higher costs for components they import and lose export markets when others (such as China and the EU) retaliate. The lesson? Trade wars bad, independent central banks good.

Not just that trying out protectionist policies and thereby proving they don’t work is educational. But the antipathy to Trump is such - all that “Orange Man Bad” stuff all over the place - that anything he proposes is opposed just because of the source of the proposal.

Meaning that the right on left is now near entirely converted to the cause of free trade. Which is indeed a silver lining of great value.

Of course, as soon as the political wheel of fortune turns we’ll find that somehow restrictions upon trade proposed by progressives are different in some manner, miraculously beneficial. But for the moment Trump has managed that impossibility, encouraged the left to embrace a useful economic policy. For which, given the rarity of the event, we should be grateful.

Ronald Coase studied real markets

Ronald Coase, winner of the 1991 Nobel Economics Prize, was born on December 29th, 1910. As is the way of most Nobel economists, he lived a long time, and died in 2013, aged 102. He studied under Arnold Plant at the LSE, and went on to become part of the Chicago School, where he co-edited the influential Journal of Law and Economics.

He gained acclaim by examining why it is that business firms develop as they do, identifying the transaction costs of entering and operating in the market as a key factor determining their size and nature. In a ground-breaking paper, “The Problem of Social Cost,” he dealt with the problems of externalities, and suggested these might be handled by assigning property rights. This approach has been applied to dealing with problems of over-exploiting common resources, such as in the Icelandic fishing industry, where quotas are assigned and traded so that boat-owners have property rights over the fish.

Coase was determined to examine markets that operated in the real world, rather than study theoretical abstract models. It was this empirical approach that led him gradually to alter his political outlook. He started out as a young man thinking of himself as a socialist, but his studies under Plant at the LSE made him recognize the superiority of market systems versus the often ill-conceived government schemes. He studied public utilities in the UK, and working in wartime with the Forestry Commission and the Central Statistical Office, he observed that, “with the country in mortal danger and despite the leadership of Winston Churchill, government departments often seemed more concerned to defend their own interests than those of the country.”

Despite these observations, he still thought of himself as a socialist, but recognized the contradiction, and gradually ceased to describe himself as such as the real world impinged more and more on the theoretical models. He became active postwar in the Mont Pelerin Society founded by F A Hayek.

The Coase journey is one that has been undertaken by many. Starting with a theoretical approach that processes information about an ideal world, setting our models and describing economic activity in terms of equations, some are led to the recognition that this bears sometimes scant relation to the real world in which people do the best they can without perfect knowledge.

It is a commonplace today that many young people’s world view is formed from ideas, and that as they experience more of what actually happens in the world they observe in practice, their views gradually modify to incorporate the lessons of experience. Many come to recognize that it is what actually happens that matters, and that it is sensible, when advocating what a perfect world should be like, to look at what the world is actually like, and at what motivates people in practice. Ronald Coase did, and taught us some valuable economic lessons in consequence.

Clearly, we should all be buying Huawei and writing a thank you note

If other people make things cheaper for us then what is it we should do? The correct response being to then enjoy that greater wealth that those others have enabled us to have. It’s not actually necessary to write a note to Santa as well but perhaps politesse would indicate we should:

The Chinese telecoms company whose role in the construction of Britain’s 5G network has been questioned amid growing security fears has received as much as £57 billion of state aid from Beijing, helping it to expand and undercut its rivals, it is alleged.

A review by The Wall Street Journal of grants, credit facilities, tax breaks and other state assistance shows for the first time the extent to which Huawei has been helped — allegedly enabling it to offer generous financing terms and charge 30 per cent less for network equipment than competitors.

Assume that all of this is true and isn’t just competitors trying to justify their own higher prices - what should our reaction be?

Well, as a result of the Chinese taxpayer being rooked by the Chinese government’s pandering to special interests we can have a 5G telephone network cheaper. Or, presumably, for the same price as we would pay elsewhere we can have more 5G telephone network. Either way we are richer as a result of those taxes paid in China.

The correct response then, to this claim of subsidy of Huawei is to buy Huawei for we’re made richer by doing so. This is true of any such foreign subsidy to a producer as well. The appropriate reaction to such unfair competition is to say thank you, please may I have some more?

That is, foreign subsidy is the same as an advance in production technology, or our useful reaction to trade itself. If, for whatever reason, other people are making us richer then we should enjoy that greater wealth. After all, that is the very thing we’re trying to do, get richer.

Certainly, the Chinese taxpayer has reason to complain but why wouldn’t we appreciate network equipment that is 30% cheaper, wherever the £57 billion to produce it has come from?

Some will complain that this all makes China richer somehow but that can’t be true. It’s a straight transfer of £57 billion from them to us, from China’s state revenues - thus the Chinese populace - to us consumers. Our only difficulty here is to work out where to send that thank you letter. D’ye think they’d let us post it up on the Tiananmen Gate?

The Gulag Archipelago

On December 28th, 1973, was first published one of the most powerful and influential books of the 20th Century. "The Gulag Archipelago: An Experiment in Literary Investigation" by Aleksandr Solzhenitsyn was an account of life in the Soviet forced labour camps, in which Solzhenitsyn himself had been incarcerated. The term GULAG is an acronym for the Russian initials of the Main Directorate of Camps. The camps were like an archipelago of islands, scattered in the vast ocean of Soviet territory, many in the harsh climate of the Siberian wilderness.

Solzhenitsyn's book narrates the history of the forced labour camps from when they were first introduced by Lenin in 1918. He traces through the various purges and show trials that swelled the number of inmates into the millions. Some of it is from his own personal recollections and the interviews he had with other prisoners, many of whom come alive again as they tell their stories in Solzhenitsyn's words. It includes extracts from diaries, personal statements and legal documents, as the picture is built up through independent brush strokes like an Impressionist painting.

It is a devastating story of brutality suffering and injustice, painting a picture of Soviet Communism that taints its memory forever. In one of his anecdotes, Solzhenitsyn tells of the businessman imprisoned because he sat down too early after a 20-minute frenzied standing ovation at the name of Stalin. He tells of a talented young poet who died in a Gulag prison camp, and he writes from memory some of the lines that would never otherwise have seen the light of day.

The story is more moving because it is told simply and factually, an unembroidered account of the monstrous inhumanity the system embodied. Western leftists and Khrushchev himself regarded it as a deviation from communism, but Solzhenitsyn saw it for what it was, an inevitable and systemic outgrowth of the Soviet political programme and culture.

Solzhenitsyn had to write it in secret, hiding manuscripts and typescripts in secret places and with friends. The KGB forced one of his trusted typists to reveal under interrogation the whereabouts of one of the copies, and she hanged herself a few days after they released her. This persuaded him to have it published in the West, instead of in Russia as he had wanted. It was first published in France (in Russian) and circulated clandestinely in Russia.

It was an immediate international sensation. Isaiah Berlin said that until that book, "the Communists and their allies had persuaded their followers that denunciations of the regime were largely bourgeois propaganda." Tom Butler-Bowdon described it as "Solzhenitsyn's monument to the millions tortured and murdered in Soviet Russia between the Bolshevik Revolution and the 1950s." It was the most powerful indictment of a regime ever made. People had known vaguely about Siberian prison camps, but never before had the general reading public been brought face to face with the horrors of the Gulag in such a way.

Early in 1974, Solzhenitsyn was arrested and deported to West Germany. He went via a spell in Switzerland to the United States, where he stayed until the evil empire collapsed, and his citizenship was restored. He returned to Russia, where he died, knowing that he had written what some described as "the book that brought down a system." Those who suffered and who died under that inhuman system live on in the pages of Solzhenitsyn's great book, confronting those who profess communism today not with what it said, but with what it did.

Just what does anyone expect to happen?

The Guardian tells us of the perils of capitalist health care:

'How many more people have to die?': what a closed rural hospital tells us about US healthcare

With the vicious callousness of the capitalist counting his money the hospital was closed, necessitating travel to gain health care.

Dunklin county already has one of the highest post neonatal mortality rates in Missouri. Dr Andrew Beach, one of the few paediatricians left in Kennett, said the entire region of about 70,000 people is now without a full-time obstetrician.

Hmm, well, that “entire region” there is doing a lot of work. For what is actually being faced here is a basic problem of population density. Dunklin County’s population has been falling for near on a century now. It’s definitely smaller than it was in 1950 and the decline doesn’t show any signs of stopping. The county, as opposed to the region, population is now below 30,000.

So what does happen when a population shrinks? The infrastructure supporting it does too. Certain things operate at certain appropriate scales. Hospitals among them.

Take, for example, our own dear NHS, that most definitely not capitalist health care system. Efficient hospital size is taken to be some 200,000 to 300,000 people in the catchment area. Which is why all those small rural hospitals have been closing ever since 1948.

The actual lesson we get from a proper examination of the numbers being that the capitalist lust for profits retained that rural hospital rather longer than the rational planning of socialism would have done.

But then telling the true story wouldn’t have suited The Guardian, would it?

When Spain became a democracy post-Franco

The Spanish Civil War (1936-1939) was a cause célèbre for left-wingers in the West. Some, like Orwell, fought with the International Brigade for the Republican side, fighting against the Nationalist armies led by General Francisco Franco. After the Francoist victory in 1939, Franco ruled as a dictator until his death in 1975. He kept Spain neutral in World War II, despite expectations that he would join the fascist powers, Germany and Italy.

In 1969, Franco designated Prince Juan Carlos, the grandson of Spain's last king, as his chosen successor, skipping a generation. The plan was to restore Spain's status as a constitutional monarchy when Franco died. It was a delicate balancing act for six years as Juan Carlos prepared to succeed. The civil war was still fresh in many minds, with many on the Left thinking the King was too close to Franco, while Francoists had support within the army. A significant fact was that Spain's rising prosperity in the 1960s had seen the emergence of an educated urban class that was ready for change, but wanted it to be peaceful.

When Franco died in 1975, Juan Carlos set in motion procedures to restore democracy to Spain, and on December 27th, 1978, he signed the Act that brought the country's new constitution into effect, after it had been approved in a referendum, preparing the ground for elections. The transition was peaceful, with the Left holding back from the demands of its extremists, and the army keeping out of politics.

The King's popularity was enhanced when he was instrumental in foiling an attempted coup by dissident army officers in 1981. Spain had successfully made the transition from a dictatorship to a constitutional democracy, and had done so peaceably. A similar transition was achieved in Portugal and Greece, and later Chile. Three West European countries that were dictatorships in the 1970s became democratic members of the EU.

Spain has faced friction with its ethnic regions, first the Basque country, and then Catalonia, but the likelihood is that any solutions that resolve these frictions will probably be peaceable, settled by compromise and agreement, rather than by military force. Spain is almost evenly divided between left and right, with a series of elections seemingly unable to entrust either side with the authority to enact major changes, but still having them compete at the ballot box instead of on the battlefield as their predecessors did.

It is one of the virtues of constitutional monarchy that it is flexible, able to adapt to changing circumstances and values. Unlike most dictatorships, it incorporates a procedure for peaceful succession. The UK's Queen Elizabeth has overseen a succession of prime ministers, and the transition of her country from head of a post-imperial commonwealth, to membership of the European Union, and now to its coming status as an independent power playing on a global stage, and trading internationally on such terms as it chooses to negotiate.

Queen Victoria is said to have remarked of Spain and Portugal, "I do think constitutions are so unsuitable for these Southern countries." Whether or not this was true then, it is not true now. Constitutions enable disputes to be settled peacefully, and this lay the groundwork for progress.

The horrendous risks of gambling

We are told that gambling poses some massive risk to the health of the nation:

Gambling-related admissions to hospital have reached more than one a day, as the health service grapples with betting addiction across Britain.

There were 379 such admissions to hospital in 2018/19, up 28% on 2015/16, according to NHS Digital figures that include those diagnosed as having a “pathological” gambling addiction.

Heavens to Betsy that’s appalling, Quick, ban it. Regulate! Something at least.

The something being take a deep breath and think.

The Gambling Commission tells us that some 50% or so - we’re using rough numbers here - of the population gamble in any one month. One admission a day means a one in a million chance of problems leading to NHS admission from gambling.

This is not the same as a micromort because we’re talking about NHS admission here, not actual death - and whatever the more lurid tales of the NHS, no, admission does not equate to death.

How much of a risk is a micromort? Walking 17 miles or cycling 10 - both risks by accident. Government also tells us that we all really must, just must, walk and cycle more.

That is, one micromort is not some killer argument that an activity must be banned, controlled or otherwise regulated out of existence. It can’t be if it is positively insisted that we must go out and take such risks.

So our action to prevent that one hospital admission per day from the effects of gambling is - nothing. Despite the manner in which this is being breathlessly flagged up as some horrendous risk to the life and soul of the nation.

Actually, there’s a greater than one in a million chance that someone will die after getting out of bed this morning - we all do live fewer than one million days after all. We do not thereby regulate getting out of bed, nor ban it.

The end of the Soviet Union

December 26th, 1991, was a bright day for mankind. It was on that day, 28 years ago, that the Supreme Soviet officially dissolved the Soviet Union and ended the Cold War. The Soviets had always taken the view that Communism would succeed across the world because of historically inevitability, as outlined by Karl Marx. However, they were quite ready to help history along with as much armed force and brutality as it might take.

It reached the ultimate in armed force with the Brezhnev Doctrine, which declared that any country attempting to move away from Marxism-Leninism would be invaded by Soviet forces to override the will of its peoples. The Soviets did indeed suppress popular uprisings in Poland, East Germany, Hungary and Czechoslovakia. The problem for the Soviet Union was that Socialism doesn't work, and the peoples of the Soviet satellite states resented their lack of freedom and prosperity compared with the countries of the capitalist West.

The Cold War never resulted in direct armed conflict between NATO and the Warsaw Pact, though there were several 'proxy' wars in the world in which the two sides backed different sides in various conflicts. There were moments of drama in which tanks faced each other yards away at Checkpoint Charlie in Berlin, or in the Cuban Missile Crisis, when Khrushchev tried to station nuclear missiles in Cuba, minutes away from US soil.

Many commentators seemed to think the Cold War might continue indefinitely. Left-wing academics looked for the ultimate victory of communism, as Khrushchev declared, "History is on our side. We will bury you." Many academics assumed that the outcome would be some kind of draw, with a system emerging that would combine elements of both capitalism and communism. Almost none supposed a total defeat of communism, but it happened.

President Reagan racked up the pressure on the Soviets by a major push to modernize military technology. This came at a time when the Soviet economy was falling further behind, and they found themselves unable to compete. Gorbachev declined to use Soviet troops to bolster up unpopular communist allies in Central and Eastern Europe, and the result was a 1989 wave of popular and usually bloodless revolutions that overthrew the communist regimes.

Even in Russia the Communist Party lost control, and when hardline communists attempted a coup against Gorbachev in August 1991, and saw it thwarted by Boris Yeltsin, the game was up. The 'Commonwealth of Independent States' was created on December 21st, 1991, and the Soviet Union dissolved itself on December 26th.

U.S. President George H. Bush expressed his feelings: "The biggest thing that has happened in the world in my life, in our lives, is this: By the grace of God, America won the Cold War." Indeed it did, and the shadow of nuclear Armageddon receded, as did the threat of a worldwide communist tyranny. Those who affect to support socialism in modern times should look long and hard at what it did, and what it would have done had not free men and women stood their ground against it.

Incentives matter

The first and most basic lesson of economics is that incentives matter. As shown here:

Across race, teen childbearing leads to negative consequences for white teens but no significant negative effects for black or Hispanic and Latino teens.

That this does matter is shown here:

In 2017, the birth rate for Hispanic teens (29 per 1,000) was slightly higher than the rate for non-Hispanic black teens (28 per 1,000), and more than twice the rate for non-Hispanic white teens (13 per 1,000). Rates for other races are reported in the text.

People do more of less costly things, less of more costly. Incentives matter.

This is about something as basic as giving birth - in a world of contraception both pre- and post- actual conception. Leading to the idea that perhaps we should not try to have socioeconomic systems where there are no incentives, or they are ignored.

For prices are indeed prices, people really do react to them.

Understanding Newton's universe

Galileo died in Italy on January, 1642, and on December 25th of that same year, Isaac Newton was born in Lincolnshire, England. He became one of the most influential and distinguished scientists of all time. Remembered for physics, mathematics and astronomy, he also worked on alchemy and theology. He was a bridge between the mediaeval and modern worlds.

Newton's main contribution was to show that the workings of the world could be understood in terms of rational laws, and the same laws that explained the behaviour of objects on Earth also regulated the most distant part of the heavens. Where people had separated existence into two domains, the Earth and the Heavens, Newton showed that they were one.

He wondered why apples separated from trees always moved in the same direction, towards the ground, and postulated that a force might be acting on them. He wondered if that force might apply to all bodies, not only those we see on Earth, but also including the distant ones we see in the heavens. Encouraged by the Astronomer Royal, Sir Edmund Halley, he published his famous "Principia," laying the groundwork of classical mechanics.

Having devised the theory of gravity, he used it to prove mathematically Kepler's empirical laws of planetary motion. He also explained tidal motions, the trajectories of comets and the precession of the equinoxes. The idea that humankind could gain knowledge of a rational and ordered universe laid the basis for the intellectual Enlightenment which followed.

Newton showed that natural laws governed the behaviour of light, using a prism to split white light into it coloured components.  Realizing that telescope lenses would always have colour distortion, Newton invented the reflecting telescope that bears his name, grinding the mirror and the eyepieces himself.

He used his mathematical 'fluxions' - differential and integral calculus (invented independently by Leibniz) to mathematicize other physical sciences, and he set out the systematic basis for a scientific method based on observation and experiment.

He was a fellow at Trinity College, Cambridge, then a professor there, requiring Royal dispensation to do so without taking Holy Orders. He served two terms as MP for the University, and was knighted by Queen Anne in 1705. He was Master of the Royal Mint, and President of the Royal Society.

Although Einstein's relativity has made Newtonian mechanics into a special case, his laws still dominate the explanations of most of what we observe. Newton encouraged us and enabled us to be bold. Today when we seek explanations of observed phenomena, it is because Newton taught us that we could do so, and also taught us how to do so. The test is not theory, something dreamed up in the mind. The test is observation, and if the observation does not bear out the theory, we change it or discard it. The universe is no longer a mystery to be gazed at in uncomprehending awe. It is something we can grasp and can understand, and something that we can predict. Newton's ideas still live.