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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

Blog Review 505

Written by Netsmith | Tuesday 12 February 2008

Now this is a campaign that Netsmith can get behind. Let's award the Nobel Peace Prize to WalMart (perhaps jointly with Tesco's?). They've done more to increase human wealth and happiness than most, after all....

A contentious statement: it's a howling error to say that people must be paid what they're worth. (Contentious but true.) 

Although it is of course a grievous error to pay people more than they are worth. 

Unfortunately this method of beating the smoking ban isn't available in England, inventive though it is.  

We like the new economics foundation, no, really, we do. A glorious example of how not to do things.

A book recommendation from a trusted source. A "wicked post-communist satire".

And finally, if you're going to use gears in your promotional material, it might be worth using a graphic designer who knows how gears work. 

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Common Error No. 32

Written by Dr Madsen Pirie | Tuesday 12 February 2008

32. "The fact that capitalism is in crisis is shown by the constant shifts from boom to bust."

Critics point to stock market and financial volatility as evidence of a "crisis of capitalism." In fact capitalism is always adjusting to new trends and reacting to new events, sometimes sharply, sometimes gradually.

Capitalism goes through business cycles. When confidence is high the market booms, but sometimes business contracts and consolidates. Despite the fluctuations of these periodic swings, there has been a steady growth rate, averaging about 2 percent per annum for over a century. Even the Great Depression of the 1930s failed to deflect the trend of that long-term average.

The business cycle's troughs and peaks are not a crisis of capitalism. Capitalism has shown itself well able to survive these cycles. Despite them, society gets steadily richer, and living standards rise as wealth diffuses through all classes.

Governments have distorted these cycles by manipulating the economy for electoral advantage. They have flooded money and credit into the economy ahead of an election to stimulate a short-term boom and gain support from the feeling of prosperity this induces. This has produced economic dislocation and inflation which had to be squeezed out later with attendant unemployment.

In recent years independent central banks have tried to smooth the business cycle's severities by combining the pursuit of sound money with making credit easier when an economic downturn loomed. It has been a precarious act which cannot necessarily be sustained, but this is not a crisis of capitalism either. It might just be problems arising from one type of financial management.

Capitalism itself is resilient. It adjusts, it survives. Its dynamism contrasts sharply with the rigidity of the planed economies, their consistent failure to deliver the goods, and their ultimate collapse. If people are free to invest in new production, to innovate and seek new markets, the resultant economy shows remarkable ability to survive the periodic shocks it encounters. 

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Democrats mute about equity in healthcare

Written by Dr Fred Hansen | Tuesday 12 February 2008

Two ambitious state projects for universal healthcare, Massachusetts and California, are about to fall apart because of huge funding problems. Barak Obama has taken notice. He keeps repeating that Hilary Clinton’s state mandate – wrongly labelled as ‘individual’ mandate - to purchase private insurance can’t work. Too many people, he says, simply can’t afford it. He has a point, since overregulated private insurance in many states comes with prohibitive premiums.

More important here is the case of existing inequality and unfairness – which both Democratic presidential candidates are silent about. We are talking about the present tax exemption for employers who provide healthcare to their employees. This is a dismal paternalistic ruling, going back to the cold war. It benefits mostly immobile and heavily unionised worker communities. The Wall Street Journal, which is free for everyone to read online since Richard Murdoch took over, raises the question of equity in healthcare. The subsidy is not just iniquitous because individuals can't get it, but also because it favours employees with higher incomes:

Estimates show that the subsidy is worth more than $3,000 for upper-income families (with higher marginal tax rates), and less than $1,000 for those on the lower rungs.

As the WSJ says: "If such inequality and unfairness existed anywhere other than health care, the Democrats would be raising hell." This lost revenue costs the US government more than $208 billion a year. It is claimed HilaryCare II, by comparison, would cost roughly $100 billion – although that is, of course, a gross underestimate according to some health economists. But the real point is this: the Democrats could hit two birds with one stone if they were just more honest. They could implement more equity and fairness in the tax system and create plenty of cash for reform to boot. Yet we are left with populist and deceptive posturing.


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Straws in the wind

Written by Dr Madsen Pirie | Tuesday 12 February 2008

It's difficult for satirists to keep ahead of a reality that verges ever closer to madness. Tim Worstall has a field day over at the Globalisation Institute site. Frederic Bastiat wrote a legendary spoof about candle-makers demanding protection from unfair competition by the sun.

We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him.

Ah yes, history taught to economics students. But wait. EU candle-makers are asking for protection not from the sun, but from that other low cost source, China. EU trade commissioner Peter Mandelson is expected to pursue a complaint against Chinese candles, and Hilary Clinton, never one to be left out of the wrong side of everything, has lauded the US Dept of Commerce in its action against the low price competitors:

Syracuse has a proud history of candle production but attempts by importers to undercut our producers have put that tradition at risk. I am pleased that the Department of Commerce heeded our call to take action against these unfair practices and recognized the importance of this decision to local producers.

The 'unfair' practices are, of course, producing and selling candles cheaper than other people can. Ah, globalization. We buy candles from those who can produce them most efficiently, and use the money saved to do other stuff instead. That is, once we have dealt with the Mandelsons and Clintons still swimming in the glue of mercantilist economics.


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And another thing...

Written by Junksmith | Tuesday 12 February 2008

New research confirms that the average rat in London is never more than fifteen feet away from a sleazy MP. 


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Blog Review 504

Written by Netsmith | Monday 11 February 2008

Now here's an interesting speculation. Is Bill Clinton actively (or subconsciously perhaps) trying to undermine Hillary's campaign? Alpha males are as alpha males do....

A welcome outbreak of economic liberalism on the British political scene.  

An outbreak of illiberalism on the British political scene. Can MPs really be thrown out of their party for attempting to uphold a manifesto pledge? 

A solution to a problem on that scene: how to adjust MPs' expenses so that they are rather fairer (to the taxpayer that is). 

An extremely important word, one which Sr. Chavez doesn't seem to have quite grapsed as yet: fungible

And finally, the results of that smoking ban in France. Smoking does cover up the smell of people themselves and in France....

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John Gray on Public Services

Written by Tim Worstall | Monday 11 February 2008

In the course of this piece bewailing the State of the Nation (yes, we do get the standard "the rot set in with Margaret Thatcher") John Gray makes one point that I fully agree with:

We should junk the idea that state services should always be run as businesses; this has left public services struggling with debt and fixated on targets. It would be better to hive off some functions from the state altogether while accepting that others should be managed on non-market lines. We should be ready to give back autonomy to institutions. Devolving power has become the catchword of the hour for the opposition parties, but it involves more than giving schools and hospitals more discretion to decide their budgets. It means leaving them free to manage themselves whether or not the result is efficient.

It's that second sentence there. I'm all in favour of certain things being run upon non-market lines: I would be most unhappy with the idea that we might go back to a more feudal arrangement about armies, that the best one amongst competitors gets to plunder the country as long as it is indeed the best. Similarly the criminal justice system: entirely happy with the idea that this is a single monopolistic system.  

Similarly I'm entirely happy with the idea that certain functions should be hived off from the State. The detailed management of the education or health care systems, as an example (and I would argue that that "discretion" urged would best be met by simply slapping a voucher on the back of everyone and letting them go take their pick).   

But really this is simply covering old ground. There are certain things that only the State can do and thus they are the things that it must do. Just about everything else can be left to a free people to work out for themselves. The only argument any of us is really having is which of those two classes does any specific subject or activity fall into? My answer might be more minimalist than yours but it's informed by more than either ideology or simple cynicism.

Give the pig's ear being made of the criminal justice system, one of those things that the State must do because only it can, why would we want them to do anything else which we might usefully do for ourselves? 

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Common Error No. 31

Written by Dr Madsen Pirie | Monday 11 February 2008

31. "In a new form of economic colonialism, multi-nationals are forcing harmful products such as junk food, high tar cigarettes and baby milk onto poor countries."

It's worth noting that predatory NGOs in search of campaigns to secure and boost their funding pick on 'scapegoat' or symbolic targets that are readily identified, and can easily be turned into whipping boys. Urban myths are spread about their alleged behaviour, and boycotts are born.

Yet multi-nationals do not force anyone to buy their products. As wealth increases, people seek for themselves some of the luxuries which rich countries have long enjoyed. It may be unfortunate from a diet point of view that many young Orientals prefer McDonalds' hamburgers to the healthy Chinese cuisine they were used to, but they do. They like it for the same reasons that young people in the West do.

High strength cigarettes have falling sales in advanced countries, but sell in the poorer ones. Again, this is not because their inhabitants are tricked or coerced, but simply because they like them. They might only be able to afford a few cigarettes a day, and prefer to make them count.

While breast milk may be better for the child, helping them with antibodies, mothers in developing countries sometimes appreciate the convenience of packaged milk. The same is true in rich countries. It is up to mothers to decide whether the convenience, and often the necessity, of continuing to work merits the trade-off. It is said that in poor countries powdered milk might be mixed with water which has not been properly boiled to kill diseases. The packaging and advertising both handle this responsibly, stressing the importance of hygiene.

Multinationals are supplying what the market wants. It might be sad for sociologists to see poorer countries trying to emulate our vices, but some products are assoc¬iated with increasing wealth and the convenience this enables people to afford.

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Quotes of the weekend

Written by Wordsmith | Monday 11 February 2008

Bruce 'The Brute' Anderson in the Sunday Telegraph:

The Treasury is full of thin-blooded and thinner-lipped characters, faces pale from too little exposure to natural light, whose fish eyes glint behind their wire-rimmed spectacles only when someone mentions tax increases.

Terry Wogan in the Sunday Telegraph, on global warming initiatives:

Still, be of good cheer, something seems to be working. Perhaps it's the Al Gore effect: global temperatures haven't risen for 10 years, the ski slopes are up to their salopettes in snow all over the world, it's even coming down all over China, and the supposedly doomed polar bears are enjoying the coldest winter in Hudson Bay for many years. Not much chance of the ice melting at -30C, with a wind-chill factor taking it to -50C.

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And another thing...

Written by Junksmith | Monday 11 February 2008

Mick was in court for a double murder and the judge said, 'You are charged with beating your wife to death with a spanner.'

A voice at the back of the courtroom yelled out, 'You scumbag!'

The judge continued, 'You are also charged with beating your daughter to death with a spanner.'

Again the voice at the back of the courtroom yelled out, 'You despicable scumbag !!!'

The judge stopped, looked at the man in the back of the court room, and said, 'Paddy, I can understand your anger and frustration at this crime, but I will not have any more of these outbursts from you or I shall charge you
with contempt! Now what is the problem?'

Paddy, at the back of the court stood up and responded, 'For fifteen years I've lived next door to that scumbag and every time I asked to borrow a spanner, he said he didn't have one!'

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