On the eighth day of Christmas...

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My true love sent to me: eight maids a-milking. In the Christmas song, A Partridge in a Pear Tree, these may signify the eight beatitudes or blessings in the Sermon on the mount: blessings to the poor, the meek, those who mourn, the just, the merciful, the clean of heart, the peacemakers, and those who suffer persecution.

But what of the milkmaids? Well, they and the cheesemakers are hardly blessed, thanks to a Catch-22 conspiracy of politics and interest groups. Britain's Office of Fair Trading has claimed that the big four supermarkets colluded to keep the prices of milk and dairy products artificially high, pocketing an estimated £270m in the process.

The supermarkets look like being forced to stump up huge fines, though they regard it all as a bit rich. After years of everyone complaining that they screwed down farm gate prices from their suppliers so low that it was threatening the future of the dairy industry, the supermarkets decided it was time to get together and be a bit more generous to the farmers. Prices were duly put up and...then the whistles started blowing. In business, you just can't win.

Blog Review 826

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Some of us were saying that the Detroit Three really did need to go into Chapter 11 bankruptcy in order to get themselves sorted out (if that was even possible). Here's a story of what happens when you don't have that legal stucture around such a complex process. Those in the know get preferential treatment.

An excellent point made. All large companies are now software companies.

Wouldn't you like to know where all the tax money goes? Well, here's at least some of it.

Could it be that Krugman's greatest fault as an economist is that he simply doesn't believe public choice theory?

Using barkingly bad statistics to back up an even more barkingly crazed policy prescription.

An 'orrible and foolish idea. Plus someone who doesn't believe in it but doesn't think it's that crazed.

And finally, squeeze 'em and squash 'em good.

On the seventh day of Christmas...

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My true love sent to me: seven swans a-swimming. In the song, this could refer to the seven sacraments, or the seven gifts of the Holy Spirit, which include things like teaching, service, and leadership.

Teaching, of course, is another of those things where there is far too much government, and far too little service and leadership. As in health, it is not that the staff are bad - but they are just badly managed, and the sector is too centrally run. The top-down Stalinist way of running things didn't deliver in the Soviet Union, and it doesn't deliver in health, education, and other public services. So we end up with sink schools from which parents and kids - usually those in the most deprived areas - have no escape.

Now, though, the world is building up experience that decentralization actually works. Instead of the state running every school, give parents and teachers money to run their own. That has led to a flowering of new schools in poor, often black areas of America where the state schools had been overwhelmed with drugs and violence and underwhelmed with learning and achievement. Now Sweden has a similar system - the money follows the choices of parents, not bureaucrats, so it tends to be spent better: and all sorts of new education providers are springing up as a result. A model for the UK? Well, we certainly think so.

The Media's Top 10 Economic Myths of 2008 (No.1)

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1. America needs a new, New Deal.

Media myth: Time magazine and other media outlets pushed the idea that Obama must be the next FDR, but they are misrepresenting the impact of the New Deal.

Originally published by the Business & Media Institute

Imagine the classic image of FDR sitting in his car grinning, with a cigarette perched from his mouth. Now imagine it had the face and hands of president-elect Barack Obama instead of FDR.

No, it wasn't a dream – it was the cover of Time magazine on Nov. 24 which made it clear the media had crowned Obama the new FDR and wanted him to institute a new New Deal.

The photo illustration of Obama and FDR came with a headline that declared: "The New New Deal: What Barack Obama can learn from F.D.R. – and what the Democrats need to do."

But even before Obama was elected, journalists were looking for FDR. CNN's Wolf Blitzer asked before the election, "who's gonna be FDR as opposed to Herbert Hoover?"

In a discussion of economic stimulus packages, ABC's George Stephanopoulos said on Oct. 19 that he thought Obama "would want to do something like what FDR did in 1932."

Guests and experts also sounded the call. On CNN, Jeffrey Sachs of the Earth Institute at Columbia University called for a revamped New Deal more than once. Sachs was a favorite expert of CNN in October appearing on 10 of the first 23 days of the month.

But what news reporters, anchors and guest didn't tell viewers is that according to several economists FDR's New Deal actually prolonged and deepened the Great Depression.

In a 2004 study, two University of California, Los Angeles (UCLA) economists found that FDR's policies lengthened the suffering of the Depression by seven years. The two economists specifically blamed anti-free market measures including the National Industrial Recover Act (NIRA) and later the National Relations Act.

Another free-market economist who has written about FDR's negative impact on the economy is Robert Higgs. Higgs told the Business & Media Institute that a new, New Deal would be disastrous. "I cannot imagine a worse course of action, short of outright socialization of the entire economy. The measures comprised in a new New Deal will not hasten general economic recovery, but will only bulk up the power of government and transfer income to privileged interest groups at the expense of taxpayers and consumers," Higgs said."

Film of the Year No. 1

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1. Cloverfield

Given my previous two picks – Gomorrah and Lust, Caution – my choice for the best film of 2008 may seem like an odd one. Cloverfield is, after all, an Americanized take on the Godzilla genre, filmed entirely on handheld camera and aimed squarely at a Hollywood blockbuster audience. But I don’t think that necessarily disqualifies it from movie-greatness: Cloverfield is, in its own way a truly brilliant film.

As the film opens we are told we are watching a camcorder video, recovered by the US military from an 'incident' site known as “Cloverfield". First we see a happy couple spending the day together; then we cut to the preparations for a going-away party. During the party, something attacks New York and the city is plunged into chaos. The party-goers flee the apartment, but the camcorder is kept on, capturing the terrifying events that follow...

Cloverfield succeeds completely as a genre film, keeping you on the edge of your seat from beginning to end. It also wins points for its innovative style, telling the story of a disaster entirely from the camcorder-point of view of a small group, and lasting the exact same time as a real DV tape. The feeling of panic that envelopes the whole film is almost overwhelming, such is the skill with which it is put together. But while Cloverfield’s only real intention is to scare you, it is also more than simply a monster movie: the implicit parallels with 9-11, though entirely unforced, give the film a powerful and unexpected resonance.

Watch the trailer here

Quote of the Year

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It is true that we had ten years of record growth when I was prime minister. I have, unfortunately, come to the conclusion that it was luck.

Tony Blair, in a lecture to Yale University

Blog Review 825

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Well, if you start off with faulty statistics and then ignore the real world, of course you can prove whatever it is that you want to.

Guess who might end up carrying the financial can for the Madoff losses? Yup, the taxpayer. Still, at least it's a $50 billion fiscal boost, eh?

No, food miles are not a good way of measuring environmental impact. Total resource use would be rather better.

So those people approving all those no money down, no income checks, negative amortisation mortgages, what were they, on crack? Umm, no, methamphetamine actually.

Competition time! Who would you nominate as your, err, umm, "coprolites" of the year?

The Angry Economist has obviusly spent too much of the season with young children. The latest Nobel Laureate in economics* is, apparently, a "doody head".

And finally, shades of Roderick Spode and those black footy bags. Can any British politician survive being the butt of the Panto jokes?

*Yes, we know, it's the Swedish Central Bank's prize in honour of etc. And no, we don't care.

On the sixth day of Christmas...

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My true love sent to me: six geese a-laying. In the song, this seems to refer to the six days of creation.

The goose that laid golden eggs in Britain was our occupational pension system. Businesses would open a pension scheme run by independent trustees, encouraging workers to join it and putting in some money themselves. By 1997, Britain’s workplace pensions savings were larger than the rest of Europe’s put together.

The 97,900 work-based pension schemes that existed in 1997 have now shrunk to just 53,801 – and falling. Of those, 18,990 no longer accept new members, 4,354 are frozen, and 1,779 are being wound up. Less than a third of the 1997 figure are still active and open to new employee members. By the end of 2007 there were about a million less active members of occupational pension schemes than there were just three years earlier. Less than half of those who work in the private sector are now paying into a pension. At the current rate of decline, there will be no contributors at all by 2020. The demise of this once-thriving savings sector is one reason why more and more people now face hard times when they retire.

The sole person responsible for this is Gordon Brown. It goes back to the ending of dividend credits on advance corporation tax, which Brown slipped into his first Budget speech in 1997. It was a typical Brown stealth tax – one that few people understood, and which fewer would even notice until they came to retire many years later. And it has taken about £175 billion out of the pockets of pension savers and put it into the Treasury’s. That is equivalent to a tax of £16,600 on every private pension saver.

The Media's Top 10 Economic Myths of 2008 (No.2)

Yet negativity abounded in 2008, outnumbering positive stories 6 to 1 according to BMI's recent study The Great Media Depression.

CNBC's "Mad Money" host Jim Cramer went further than most journalists actually warning that the country was in danger of "Great Depression, No. 2." On "Street Signs" Sept. 11 Cramer excitedly warned that unless the banking system was bailed out, a second Depression could be in the future.

 "It's obvious the bank system is falling apart," Cramer said. "Let's save it before it goes to zero." Two months later on Nov. 11, Cramer again cried for a bailout -- this time for General Motors.

Cramer responded to criticism saying, "I don't care– for the same reason that AIG was in the business of a criminal conspiracy – big deal," Cramer said. "It's like look – we got to bail them out. We have to. We have to keep the Great Depression off the table."

Ironically in December, Cramer chastised people using Great Depression warnings calling them "scare tactics."

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2. Welcome to 1929: Great Depression II

Media myth: The news media drew hundreds of parallels to the Depression, despite economic data that is not even close.

Originally published by the Business & Media Institute

According to network reports, America's finances are "like a house of cards." The media thought things were so bad that journalists on ABC, CBS and NBC hyped similarities to the Great Depression more than 70 times in the first six months of 2008. An additional tally found at least 157 more comparisons from July 1, 2008 to Oct. 27, 2008.

But that parallel doesn't hold up, particularly when looking at daily coverage of the stock market crash in 1929. The difference between how the 1929 and 2008 media handled a crisis was profound – with modern journalists hyping every event and their predecessors expressing calm optimism. A scholar of the Depression, Federal Reserve chairman Ben Bernanke said Dec. 1 that there is "no comparison" between the two situations.

In actuality, the economic struggles of 2008 couldn't really compare to the Depression. At its peak, unemployment skyrocketed to more than 24 percent. Gross domestic product actually dropped four straight years – 1930-1933 – and took until 1941 to again pass 1929 levels. "It was the worst slump in history, and the most protracted," wrote Paul Johnson in the introduction to Murray Rothbard's book "America's Great Depression." "At one point 34 million men, women, and children were without any income at all," Johnson continued. [Click 'read more' to continue]

Film of the Year No. 2

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2. Lust, Caution

Wong is a student in Hong Kong in 1938. As her drama troupe becomes involved with the effort to resist the Japanese, Wong infiltrates the social circle of Mr Yee, a hated collaborator, intending to facilitate his assassination. The action shifts to occupied Shanghai, 1941, as Wong becomes Yee’s mistress. The conflict inherent in their dangerous, passionate relationship gives the film both its emotional core, and its title: Lust, Caution. The closer Wong gets to Yee, the more vital she becomes to the resistance – and the more difficult her deceit becomes.

Directed by Ang Lee, Lust, Caution is a brilliant, intense, and moving piece of cinema. It melds espionage, romance, noir and war into a seamless, epic whole that has rightly been hailed as his masterpiece. The acting is superb, the cinematography sumptuous, and the story astoundingly powerful. Most of the publicity surrounding the film may have centred on its sex scenes, but that is unfair. While they are undeniably explicit, and sometimes shocking, these scenes reveal far more than just naked flesh. Indeed, they say far more about Yee and Wong than simple dialogue ever could. Lust, Caution is a remarkable achievement. Watch the trailer here.