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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

The effect of rising consumerism

Written by Tim Worstall | Saturday 04 January 2014

We're all aware of the standard critique of consumerism: that we shouldn't in fact want more at all. We should be happy with our lot, accept that there are limits and, you know, just sorta vegetate with what we can currently do and make. However, as Virginia Postrel points out, that's not really how the human race works:

Rising expectations aren’t a sign of immature “entitlement.” They’re a sign of progress -- and the wellspring of future advances. The same ridiculous discontent that says Starbucks ought to offer vegan pumpkin lattes created Starbucks in the first place. Two centuries of refusing to be satisfied produced the long series of innovations that turned hunger from a near-universal human condition into a “third world problem.” Complaining about small annoyances can be demoralizing and obnoxious, but demanding complacency is worse. The trick is to simultaneously remember how much life has improved while acknowledging how it could be better. In the new year, then, may all your worries be first world problems.

We only ever moved out of the caves because someone thought that house sharing with a hungry bear was unsatisfactory, only ever invented the car because of the rising tide of horse dung, it's the very things that we find unsatisfactory currently that drives the vast wave of innovation that has been sweeping us along these past few centuries.

And the real strangeness of this is that while we might indeed be desiring more transport, or food, or communication ability, whatever it is, that innovation manages to bring us that more at the expense of using fewer resources. Smartphones are, obviously, using fewer resources than trying to run Facebook on semaphore flags. So contrary to the standard story it is our very consumerism that reduces resource use via the mechanism of innovation.

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Excellent advice to all budding politicians everywhere

Written by Tim Worstall | Friday 03 January 2014

Don Bourdreaux has some excellent advice for buddfing politicians of all flavours and stripes:

If you really wish to serve your fellow Americans, stay in the private sector where those with whom you deal pay you voluntarily – that is, in ways that prove that you are serving them well. In politics, you’ll be spending money taken from others forcibly, so you’ll have precious little reliable feedback on whether you are helping or harming your fellow Americans.

Quite.

Indeed, it's one of those well known little secrets among economists that people value what politics brings them at less than the cash that it costs politics to bring them to them. Even the US Census agrees that poor people value Medicaid at less than it costs to provide it, food stamps at less than their face value. They'd rather have the cash than what the politicians think they should be getting. Over here the same is true of housing benefit: everyone would far rather have the cash. Thus even the welfare state is value destroying.

And in the private sector, in the absence of politicians deliberately creating a rent seeking opportunity for you, you will only be able to extract from people what they think your actions, activities and services are worth. Less in fact, for there will always be a consumer surplus: so you know that your activities are creating more value than you are receiving.

It's true that we do actually need a government, thus we need people to be part of it. But think about what that government is really tasked to achieve: finding a method of making sure the bins are emptied. And that's no life for a bright and ambitious thing like you. Get off into the private sector and create some value rather than being in politics where you shanghai it at gunpoint then destroy it. And this applies even more, not less, if you have the public good at heart.

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It is absolutely vital that you deploy your consumerism responsibly

Written by Tim Worstall | Thursday 02 January 2014

I thought this was rather good from Julian Baggini in The Guardian: although it does have one terrible error in it:

You might dismiss this kind of ethical consumerism as mere gesture. Waving my right-on debit card as a badge of honour as I pack my Fairtrade chocolate into a canvas tote bag can look like a poor surrogate for revolution. This is part of a knowingly superior narrative of impotence that tells us our day-to-day choices can't lead to meaningful political change. "The system" is inherently corrupt and to believe we can affect it by our choices is to buy into the very myth of consumer power that late capitalism promotes in its own interest. It is to believe that virtue can be bought, when the vice of the system is precisely that it puts a price on everything, including a clear conscience.

But this narrative is wrong. It portrays capitalism as though it were a kind of entity with a will of its own, whose only desire is to maximise profit. In fact capitalism is amoral, not immoral. It doesn't care for right or wrong, only for what people demand. If we demand goods and services at the lowest price, capitalism will provide them, and damn the social and environmental consequences. If, however, we demand Fairtrade bananas or recycled toilet paper, capitalism will provide them too, as it demonstrably has done.

These are not things done by capitalism: they are things done by markets. Where there is choice then it is indeed possible for people to have a choice on how, with whom and upon what they spend their money. A capitalism without markets (ie, monopoly capitalism) would provide none of those choices: just as any other economic system without the choice offered by markets would not allow the consumer to express their preferences. Capitalism and markets are simply not the same thing at all and it is markets here that Baggini is praising.

Other than of course he's precisely spot on. If you want things to be produced in a certain manner then it's up to you to spend your money so as to encourage producers to do their production in that manner. You not only can but you ought to express your moral choices in the way you decide upon who to buy from. I tend to buy from factories located in poverty stricken hell holes as that's the best way to alleviate poverty we've yet found. Agreed, others might differ on this: but it's still true that you should deploy your financial firepower to make the world a better place by your own lights.

It is, after all, vastly better to light a candle than to curse the darkness and every pound spent on your moral goals brings them that one pound closer.

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I'm still trying to understand why Bitcoin won't fail

Written by Tim Worstall | Wednesday 01 January 2014

Anything that people happily use as money is of course money. So, if you can get people to use something as money then it is money: in which sense Bitcoin is indeed money. You can buy things with it therefore it is money. And yet I still can't quite see why it's going to be successful: successful here meaning a widely accepted form of money and accepted over the long term. There's many economists writing about it now in a manner that there weren't even just a few weeks ago: it has reached at least that level of success, that people are sucking their teeth over it. Tyler Cowen, Paul Krugman and friends, there's a lot of very clever people whose opinion I respect saying that it's not going to work.

And do note that it tends to be the nerds and the computer scientists who insist that it will and the economists who are a great deal more unsure about it.

My sticking point comes from the ease with which you can create a cybercurrency. The Bitcoin source is open, so anyone can use that. And I asked a friend who knows about these things to estimate how much work it would take to launch a new such currency based upon some tweaks to that code. A couple of days of pondering later he came back with "two man months". And that's why I just don't think it's going to work: it's too easy to copy.

Assume that, as Cowen does, the entire idea of cryptocurrency does indeed work: thus there will be seignorage profits to be made from introducing a new one. Do the two man months of work, launch the new currency, reserving some portion (20% sounds nice) of all that will be issued over time for the launch partners and, because cryptocurrencies are successful this will be a workable business plan. But precisely because it is a workable business plan then may people will be doing it and thus there will be no scarcity value of cryptocurrency. With no scarcity comes no value and thus the failure of cryptocurrencies.

In the end I see it as the Golgafrinchan B Ark using leaves as money. They end up having to burn down the forest to stop the inflation. And given the ease of launching a new cryptocurrency I can't see the extant ones retaining value.

I'm entirely willing to be shown to be wrong here but I really just don't see the long term "success" here. I see the South Sea Bubble part of it, ride the wave until it's over but other than that....

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In praise of those complaining economics students

Written by Tim Worstall | Tuesday 31 December 2013

I've rather changed my mind about those economics students up north revolting (no, they are having a revolt, they are not revolting in themselves) over the curriculum they are being forced to study. I don't in the least take seriously their complainty that they're not being taught Keynes for I've read their syllabus and they are. But in a more general view I think I am converted to their cause. As Peter Boettke points out:

This observation is nothing new. It can actually be found in Adam Smith’s The Wealth of Nations. Smith discusses the differences in approach to the teaching found in Glasgow and Oxford, respectively. Professors in Glasgow were paid through direct student fees, and thus they devoted more time to teaching their students, whereas the professors in Oxford were paid from an endowment, and so did not pay attention to the students in the least.

Given that the students are, through their loans, paying for their own education then yes, they should indeed be taught those parts of the subject that they desire to be taught in the manner that they wish. I do also have a feeling that exactly that paying for their own education is going to lead to their wanting ever more of that highly mathematical modelling as a result: for that is what will get them the jobs in hte merchant banks to pay off those loans. But it is indeed their money and they should not only be allowed, but encouraged, to spend it as they wish.

This is, after all, one of the things that we do try to encourage in the understanding of economics, that people spending their own money on their own desires works better, most of the time, than any other possible system.

One possible confusion though at the end of all of this. If they do get taught the economics they desire to be taught, in the manner they so desire, and then they cannot find jobs at the end of it all, will this be seen as a failure of market economics or a failure of the planned system of what students ought to be taught? And given that the students are demanding to be taught much more about alternatives to markets, about market failures, will they take their own market demands as having been the thing at fault?

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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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From the annals of standard bureaucratic behaviour we bring you the RSPCA

Written by Tim Worstall | Monday 30 December 2013

It is most politically incorrect to attack the RSPCA: after all, they're the guardians of those animals that we English treat so much better than our own children. But I'm afraid that it does have to be done. For we're now seeing standard bureaucratic behaviour from said RSPCA, something straight out of C. Northcote Parkinson:

Pet owners should be forced to join a register, buy a licence and pass a competence test to help tackle the abuse of animals, the RSPCA’s chief vet has suggested. James Yeates said the introduction of such measures would “make it clear” that owning a pet was a “privilege and a responsibility”.

A privilege that you'll only be abe to enjoy if the RSPCA approves of both you and your pet no doubt.

And yes, I know, the organisation is claiming that this isn't quite what anyone means but then we've all seen kite flying of this type before. Further, we know absolutely that any such licence scheme would be a costly monstrosity. We used to have dog licences and the system cost far more to administer than any revenue that came from it.

But the real point comes from what this suggestion tells us about those inside the RSPCA. They're a bureaucracy just doing what bureaucracies do. Which is, as Parkinson pointed out to us, simply exist for the sake of existing. Once established, once past that first flush of success in addressing whatever it is, the point and purpose of a bureaucracy is simply to maintain its own existence and, if possible, expand the budget and size of it. And that's it.

Which is precisely what the RSPCA is doing here. There is no point or purpose to licencing all of the nations pets other than to give the RSPCA something to do. Which is why they have suggested it.

And, of course, why we should tell them where they can get off and the horse they rode in on.

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Isn't it wonderful how student loans are starting to actually work?

Written by Tim Worstall | Sunday 29 December 2013

I thought this was an amusing little complaint from some recent student. They seem to have rather missed the entire point of having student loans to pay the tuition fees in the first place:

I see friends of mine recently out of university struggling to find graduate schemes, permanent jobs or anything beyond zero-hour contracts. My degree has been vital to my job, but it saddens me to say that, were I 18 again, I wouldn't choose the subject about which I felt passionate – I'd make my choice based on job opportunities and pay.

What amuses me about this is that of course this is the very reason that the system was changed.

There was indeed a time when it didn't matter all that much which subject you did at university. And it was also at that time that you not only didn't have to borrow to pay the fees, you got a government grant to support you while there. But the other side of that system was that only 10% of the age cohort went. Thus a degree was indeed a signifier of having some brains to get in and further, the persistence to then graduate as well.

Now we have near 50% of the age cohort going. And thus the simple possession of a degree is not going to be a useful signifier to future employers. And it's also true that with 50% going it's not going to be the taxpayer that picks up the entire bill. Which leads us to our system of loans to pay the fees. And look at what then happens as a result of that.

Students start to think about where the pay will be good after they graduate. Good pay for any particular job of course being a signal that there is a (relative) lack of people both qualified to and willing to do that job. So by making the students responsible for their own costs (in however subsidised and dilatory manner those loans are collected) we have actually provided them with the incentives to study something that is of use to the rest of us.

Isn't it wonderful, introduce market signals into the university system and we get people preferentially studying for those careers where we've a shortage of good people? My word, quite remarkable, markets and incentives work.

One more thing we might note: there have indeed been some governmental actions over recent decades that can be said to have worked just as this one has. They're always when the government decides to bring in more of those market incentives and price signals though. There might be a more general lesson in that somewhere....

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The net migration cap is hurting Britain

Written by Sam Bowman | Saturday 28 December 2013

This morning's Guardian carries a letter by the ASI, the Institute of Economic Affairs, the Institute of Directors, the Centre for Policy Studies, the Entrepreneurs Network and Conservatives for Liberty, on why we oppose the government's migration cap. I wrote about why more free marketeers should care about immigration recently — we're lucky that the UK's foremost free market think tanks do.

The government's net migration cap is hurting Britain's economic recovery and long-term fiscal health. It can take around three months for a business to apply for a visa for a prospective employee, a significant unseen cost of the cap, and international firms may prefer to base themselves in countries where they can bring in staff from abroad more easily than they can in the UK.

Entrepreneurship is being affected, too: more than a quarter of Silicon Roundabout startup founders are foreign-born, and more than half of tech startups in California's Silicon Valley are founded by immigrants. The cap on immigration is a cap on the innovative industries Britain needs to thrive.

According to the Office for Budget Responsibility, without net immigration of at least 260,000 people per annum, public debt will approach 100% of GDP by 2060 as we struggle to pay for a ballooning pensions and healthcare bill. Countless studies have shown immigrants create jobs, raise natives' real wages and even boost productivity.

Public concerns about benefits tourism are legitimate but are better addressed by reforms that restrict access to the welfare state. The migration cap does not discriminate between the small number of would-be welfare tourists and the many people who would like to work productively to create a better life for themselves and their families. The cap is hurting Britain and should be scrapped.

Sam Bowman, Research director, Adam Smith Institute,

Mark Littlewood, Director general, Institute of Economic Affairs,

Simon Walker, Director general, Institute of Directors,

Ryan Bourne, Head of economic research, Centre for Policy Studies,

Philip Salter, Director, The Entrepreneurs Network,

Thomas Stringer, Director, Conservatives for Liberty.

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In which we introduce the word superfetation

Written by Tim Worstall | Saturday 28 December 2013

Over at Voluntary Exchange we are introduced to the word "superfetation". Strictly speaking it refers to a second pregnancy that starts while a woman is already pregnant. But it is often used colloquially to have a wider meaning than that. And it is this wider meaning that we should perhaps popularise:

This came up in a discussion of Obamacare:

… The new American mandatory insurance system has shortcomings that are not necessarily related to the idea of mandatory insurance - as instead with the bureaucratic superfetations of such a system engendered by the way the US Administration has planned it.

I like that idea: layers of bureaucracy being added onto existing layers of bureaucracy (perhaps, because the earlier layers aren’t working well). I’ve always described bureaucracy as continuing revisions of a Frankenstein monster: it didn’t quite work the first time, so we’re going to staple on some new part and hope for the best.

Now I have a word for that: superfetation.

The Chancellor announcing help for people to buy houses then the Bank of England raising interest rates in order to cool house prices: superfetation. The government subsidising green energy plants with vast feed in tarrifs, then having to restrict the number of green energy plants in order not to bust the budget: superfetation.

A word I think we should use more and I've no doubt that you can provide further useful examples and definitions in the comments.

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