The Pin Factory Blog

The investment monks - every city should have some.

All this shouting about speculators is simply silly:

All humans with a pulse plan beyond today and are, therefore, speculators.

Another quotable quote, this time from the CEO of McDonald's:

If you can’t get your kids to eat vegetables, why is it my job?

A third one:

If you don't have clear and convincing evidence that doing something is better than doing nothing, do nothing.

That last rather explains some of the logic of the Irish vote on the Lisbon Treaty, no?

Something to occupy you intellectually over the summer: a book club on Capitalism and Freedom.

The current government seems to be treating the legislative programme as a lengthy form of press release.

There seem to have been a few design corners cut on the new Eurostar trains.

And finally, politicians don't build things.

John McCain has been cruising the Rust Belt, empathizing with those who are hardest hit by economic hard times: “America is hurting today," he said. “Michigan is hurting today. The automotive industry is hurting. And we’ve got big problems, and we’ve got big challenges… [but] I have to tell you — and I know that it’s not popular — I do believe in the overall benefits of free trade."

For many in the developed world, there is indeed reason to be pessimistic. The manufacturing jobs that are leaving are not likely to return. The credit crisis and high gas prices are making things more difficult for many. Perhaps this is why more Americans than ever believe their children will not be better off than they were.

The good news, however, is that the Europe, the UK and the United States will be more prosperous in the future than they ever have in the past—as long as they recognize the opportunities that the globalised world will bring. Even though many jobs are going abroad, resulting in an increased demand for oil and food, a more prosperous world will tremendously benefit the developed world.

Why? China, India, and Brazil have a combined population of more than two billion people. As they grow more prosperous, the size of the market will increase dramatically. This creates a remarkable and unprecedented opportunity for entrepreneurs in Europe and America. Our workers will no longer anchor the assembly lines, but will market, create, and imagine new products for a better world. Although the transition may be difficult, a new and more prosperous day is on the horizon.
 

Even for proponents of a nanny state, this one is rather extreme.  BSI British Standards is outlining safety guidelines that should be followed by all owners of those age-old menaces to society: trees.  That’s right; to protect against falling limbs (which kill roughly 6 people per year), BSI Britain Standards is writing new guidelines that will suggest yearly inspections, biannual professional tests, and more extensive examinations every 5 years for all trees.

In the Economist article on the matter, Rick Haythornthwaite, chairman of the Risk and Regulation Advisory Council, attributes this move toward intense regulation to two trends:

The first is the tendency for small risks to become magnified in the public mind and provoke disproportionate responses. The second is the growing involvement of special-interest groups in campaigning for tougher regulation.

For most of us, trees are beautiful additions to any landscape and have a positive impact on the environment, to boot; they are not menaces from which we need to be protected at all costs.  If keeping trees becomes expensive or annoying, people will simply cut them down; in fact, trees in public places have already been cut down because  of liability fears.  Regulation that costs time, money, and results in trees being cut down helps no one- except, perhaps, the tree trimming companies that support these guidelines.

In the end, though, the Economist gets it right; the danger is not just the loss of trees, or the additional annoyance for everyone who owns them.

The real danger highlighted by the proposed guidelines is that of regulation gone wild. 

A recent article from my hometown newspaper pointed out an interesting quirk about Minnesota’s (and most government) wage scales. In Minnesota, the legislature votes on the governor’s salary. There is a cap on the governor’s salary of $120,303 and also a law that state executive-branch employees cannot earn more than the governor.  These laws have had the effect of keeping most state employee salaries from increasing very little in the last ten years and the governor’s from increasing at all.

One of the concerns presented in the article is that the public sector may lose out on skilled employees to the private sector because of the cap on wages. With higher gains to be made in the private sector, the more innovative, competent, and motivated employees will leave public service jobs. That is why salary caps, and minimum wages to the disbelief of many, are bad news for labour markets. They distort the market’s natural tendencies to arrive at wages that benefits society the most. Government jobs, especially those towards the top of the scale, don’t function in the usual market terms because wages are left up to legislation. If this was a private sector problem the caps would be removed and things would be sorted out through the market.

While government salaries should be decided upon by the legislators, they should coincide with comparative market salaries and not include useless stipulations. At the very least, they should keep with inflation. Finally, the salaries should be transparent to ensure accountability and allow public scrutiny.

What more could be said?

"For every action, there is an equal and opposite government program."

Anonymous

Parsing that Paulson statement on Freddie and Fannie. If you prefer, the art of explaining what someone means rather than what they say.

One would have to have a heart of stone not to laugh. The long standing French suppression of minority languages is now found to be against EU law.

The government holds a consultation exercise. People register to tell them what they really think. Then this happens.

Globalisation affects a great deal more than just trade: mating patterns for example.

Explaining just how and why John Prescott hit that protestor.

Most people are currently thinking that the best investment advice is "run away! flee!". Here's something more useful and less hysterical.

And finally, introducing the Pirate Encyclopedia.

Greg Mankiw has a piece in the New York Times about what policies politicians should pursue if they wished to chase that all important economists' vote. Well, perhaps not all that important in terms of the number of votes to be gained, but still interesting in outlining what he sees as uniting the profession (to a large extent at least).

Number one is free trade (or we can be picky and say "freer" trade) which is, at least around here, entirely uncontroversial. Similarly the legalisation of drugs and opposition to farm subsidies. They're really aspects of the same point, after all, as is leaving oil companies and speculators alone. While markets aren't perfect, they are usually better than what politicians try to put in their place.

Inviting more skilled immigrants is a little more controversial: it's a planning of the jobs market. Better perhaps to simply remove restrictions and allow that market to be free as we argue the others should be. Taxing the use of energy does indeed make sense if you've bought into the concerns over carbon emissions.

The one that might most surprise those outside the hallowed halls where economists tread is to raise the retirement age. When 65 was set as the age for the state pension (social security over there) that was about the average lifespan: it was indeed thus a reasonable form of social insurance, insurance against the idea that you would outlive your rational level of savings. Now that lifespans are well over a decade longer (and prospective lifespans for those who have already reached 65 much longer again) raising this age makes great sense: even if not to most politicians.

Unfortunately, there aren't enough economists to make up an important voting block so we're unlikely to see them pandered to in this manner: might I suggest though that given that economists are the experts on these matters, that politicians at least start to listen to them?

The last suggestion is a little different: that spending upon economic research should be increased. Yes, it's special interest group time again, when talking to politicians make sure to mention that your own group, your own interests, should have more of other peoples' money.

But then that just proves that economists are human, right?

Cristiano Ronaldo is under fire for claiming he is like a slave because Manchester United will not release the final year of his contract so he can play at Real Madrid. We should all mourn this blatant violation of human rights.

Poor Ronaldo. In 2004, Man U exploited a helpless and innocent teenager, and then tricked him into signing a new contract in 2006 for £56 million 2010. When he said, "United have stood by me and been there for me and I want to repay that," it was probably against his will. Those monsters at Man U made him say it. In April 2007, he renegotiated his contract through 2012 for £120,000 per week and said, "I am very happy at the club and I want to win trophies and hopefully we will do that this season."

Those guys in Manchester United can manipulate anyone to say anything. It’s ludicrous to believe anyone could possibly be happy playing football for a living—especially for such little money. It won’t be long until the bosses at Man U realize their errors and write the greatest hymn of anguish and repentance since “Amazing Grace" and Ronaldo releases his album of freedom songs.

For someone named after the Great Ronald Reagan, Ronaldo should realize that this is actually called CAPITALISM, not slavery. Two people negotiate, agree on the terms of a contract, and sign it. Then both parties do what they agreed. In this case Man U agreed to pay Ronaldo a ridiculous amount of money and Ronaldo agreed to play football for 5 years. A little different than being transported from Africa to South Carolina in the barracks of a terrible ship, being sold from one owner to the other, and performing forced labour your whole life…

Housing crisis...what housing crisis?