The Pin Factory Blog

Q. What did the cannibal get when he was late for dinner?
A. The cold shoulder.

From Power and Plenty:

Another important economic link between Venice and the Ottoman Empire was the sale of high-quality Venetian woolen cloth to the latter. In the course of the 17th c., however, the Dutch and English, yet again, displaced Venice and the other Italian producers in the Levantine markets for these key manufactured goods. Charles Wilson pithily accounts for this by observing that "the Turks wanted cheap, light cloths. The Venetians offered dear, heavy ones." Constricted by guild regulations, Venice insisted on maintaining high quality and high prices. Meanwhile, northerners lowered quality and price... 

That old saw about those who ignore history being condemned to repeat it comes to mind really. Most obviously in the current success of clothing chains like Matalan and Primark: it appears that what the Brits want is cheap and light and so if you lower quality and lower price...

And so many  business disasters can be explained by that "constricted by guild regulation" line. No, it doesn't mean just unions, management has been just as purblind at times: the Austin Allegro was proof that there are things too light, too cheap and too low quality even for the British.

The basic lesson though is obvious, isn't it? The producers who actually provide what the consumers want prosper, those who attempt to supply what suits themselves do not. The next question I suppose is which side of that line Microsoft Vista belongs?

There may be trouble brewing for some microbreweries! A worldwide shortage of hops is starting to make its mark on the price of beer. The cost of some hops, the ingredient that gives beer its distinctive flavour, has quadrupled in price over recent years.

A whole host of factors are behind the current price rise: poor crops, bad weather, and most of all lower prices. All of which has led to a decrease in supply. This is a perfect example of supply and demand economics in action. The price fluctuations that the consumer sees are a reflection of a market that is free.

The price of hops had fallen in recent years due to over production and low demand from breweries. This meant that many producers left the market to grow other more profitable crops, such as cherries and apples. But then as hop production fell, beer had a resurgence in popularity. While the big companies have insulated themselves from this through futures contracts the microbreweries have been left to fight it out over the remainder. It’s all very apparent from the global hop acreage figures, which have fallen from 236,000 acres in 1992 to 123,000 in 2006.

Hops then wouldn't be a bad investment for the farmers of South East England. Unfortunately it takes three years for a hop field to produce, so in the meantime beer drinkers are going to face slightly different tasting and higher priced beers. And unfortunately for some microbreweries, they may go out of business, especially if the taste of their beers is not able to match up to the price.

Is it better to read a dead tree magazine? Or the online version? Chris Anderson thinks it's the paper version. Martin Stabe begs to disagree (sometimes).

More on the Danes and their tax rates and emigration. It's the English language that is doing some of the damage.

Even more: there's only one country that has tax laws which make such escapes impossible

A tawdry tale of what happens to the money extorted from us. 

As is increasingly happening, the arguments of Paul Krugman the columnist are refuted by those of Paul Krugman the economist. 

For those still unsure exactly what a CDO is (or why they've become a problem) here's the explanation. In short, too much of a good thing. 

And finally , a new political lexicon (the less polite description is the explanation of how politicians are lying to us: whether they are or not is of course not at issue). 

My true love sent to me: five gold rings. It probably means the first five books of the Old Testament, but to me five rings means the Olympics, which are coming to London in 2012.

Well, they say that. But it's a typical government-led project, so who knows? The London bid for the games put the cost at £3,375m, but in March this year Tessa Jowell revealed that the cost had risen to £9,300m - a tripling of the costs in just a few months. Something of a black hole, which the hole-vaulting Culture Secretary explained as due to VAT, inflation, and a whopping £2,700m 'just in case things go wrong' fund (a figure larger than that the original estimate for building the entire Olympic Park. As the bulldozers move in, it cannot give much confidence to their operators that the costs of all this, including their wages, are still being calculated.

The Scottish Parliament building started with an estimate of £40m and ended up costing £400m. Still, we taxpayers can afford it, can't we?

One day, Uncle Joe got fired from his construction job. His nephew asked him what happened.
"You know what a foreman is?" he asked. "The one who stands around and watches the other men work?"
"What's that got to do with it?" he asked.
"Well, he just got jealous of me," Uncle Joe explained. "Everyone thought I was the foreman."

One of the perks of this wonk land stuff is being sent books before their publication date so that we terribly important people can tell you what to think about them before you read them. As with the upcoming "Power and Plenty" which bills itself as an economic history of the past thousand years. I found it fascinating and it'll provide me with all sorts of wondrous arguments to deploy in times to come, some of which I'll sketch out in the next few days here (no, don't worry, I'm not going to try a comprehensive review of such a complex book in a blog post).

One of the things I like about it is the way that little factoids pop up which explain, make clear in a simple manner, quite complex situations. At one point we're told that the Mongols commanded the services of 50% of the world's horses. At a time when the animal was both the transport to the battlefield and the tank equivalent once there this rather explains some of their success, doesn't it? Another is

...the number of operative hours to process 100 lb of cotton was over 50,000 for spinning by hand in India. In England it was cut to only 2,000 by the 1779 invention of Crompton's mule, and fell to 300 by 1795 and 135 by 1825, compared with 40 in 1972.... 

That after two centuries only 0.1% or less of the man hours are required to do the same thing as before rather explains why our cupboards are filled with a multiplicity of clothes while our forefathers had, if they were lucky, two outfits, daily and Sunday best.

The excellent point is also made that such technological advance really rather required international trade: without it, the domestic market would quickly have become flooded and the economies of scale would never have appeared. 

Opponents of enhanced parental choice [in education], such as Mr Balls [the Schools Secretary], say what most parents want is for their local school to be a good school. That is the ideal situation but, as Lib Dem education spokesman David Laws has noted, that is an aspiration, not a policy. A policy requires a mechanism for making it happen. Parental choice through a voucher scheme is precisely such a mechanism. A continuation of commandments from Mr Balls is not.

- Patrick O'Flynn hits the nail on the head in the Daily Express.

Excellent advice for those who would understand either American politics or economics in general. Read PJ O'Rourke. Greg Mankiw (who teaches the ec.10 course at Harvard) has been known to add him to his reading lists.

For those who would go a little deeper, another recomendation. Hernando de Soto manages to explain more about why some places grow and others don't.

Gary Becker explains something about the sub prime crisis:  it can't have been a plot by predatory lenders, as it's the lenders who are losing the money (unless said lenders were in fact insanely stupid which would be a rather different problem).

(Sweary alert) We have the usual sight of politicians being generous with our money, not so much with their own.

A thought on social democracies and their high tax rates :  how do you keep them (both the taxes and the citizens subject to them) when emigration becomes ever easier?

One way the net is changing the world: making the oddest of hobbies easier. 

And finally , Bah Hecate! to the whole Christmas thing. 

My true love sent to me: four calling (or colly) birds, which in A Partridge in a Pear Tree are said represent the four gospels or the four evangelists, Matthew, Mark, Luke, and John.

Emvironmentalists have been very agitated of late by the government's plans to build a barrage over the estuary of the River Severn, in order to generate power from tidal movements. The argument is that the estuary is home to many species of wading and migrating birds, who could no longer survive there.

Birds aren't actually as dim as we think, and if they lose one habitat I've no doubt that they will fly off and find another. But the barrage idea is pretty bird-brained in that the amount of power that it would actually generate is tiny in relation to its cost, including the largely unknowable costs of maintenance. An even more bird-brained plan emerged last week - a massive programme to build offshore wind farms that might produce up to 20% of the UK's electricity within just a few years. When you look at the sums it means building and installing two generators the size of the London Eye every day, but politicians were never very good at questions of feasibility (or cost - remember the Scottish Parliament).

Frankly, these renewable energy sources are viable only because of the £1bn or so electricity customers are forced to stump up for the 'renewables obligation'. Though I'm not sure whether marine installations will ever be viable (how do you even get to them when they need a spot of oil? And who's going to pay for strengthening the grid to take all this extra power they're supposed to generate. And when we've all got our turkeys in the oven and the wind isn't blowing, what then?). We'd be better, cheaper and cleaner building new nuclear power stations. There - I've said it. Otherwise, a light near you will be going out soon.