Those shock GDP numbers


No, I'm not about to start saying that everything is just peachy, even I'm not that optimistic. But can we at least have a little bit of proportion here?

Economists were expecting GDP to have contracted by 1.5pc in the final quarter of last year – in line with the preliminary estimate – but the Office of National Statistics had to revise the figure downwards to 1.6pc.

It is the biggest quarterly fall in GDP since 1980 and the biggest annual fall since the last recession in 1991.

That proportion being that the economy has indeed just shrunk. All the way back to the size it was in, ooh, say, March or April of last year. Yes, it might indeed get worse again as well but there's just about no one who thinks that it's going to shrink as far as, say, the level of 1999. If it did that would be a Great Depression sized fall and there are very very few who are predicting that.

As I say, I'm not trying to insist that everything's just fine, nor that a lot of people are going to actively enjoy the downturn. But I would like a little more proportion.

The one defining characteristic of this liberal capitalism shtick is that it delivers, consistently, over time and for the average person, a rise in the general standard of living. The other name for this is economic growth. As the major report on climate change notes:

The global economy expands at an average annual rate of about 3% to 2100, reaching around US$550 trillion (all dollar amounts herein are expressed in 1990 dollars, unless stated otherwise). This is approximately the same as average global growth since 1850, although the conditions that lead to this global growth in productivity and per capita incomes in the scenario are unparalleled in history.

We think that trend growth, the possible or even likely long term growth rate, for the UK is 2.5% to 3%. A 1.6% fall in GDP is thus we've lost that year's growth and retreated 8 months. This isn't, I'd like to posit, the disaster that most seem to be saying that this is.

It certainly isn't enough of a disaster for us to throw out that only economic system ever uncovered that provides that 3% growth over the long term.

So before we decide that capitalism is dead and we're off to bury it in regulation and stagnation, could we just make sure that we really do want to stop the occasional hiccup at the cost of never again having that 3% growth?

Oh, and yes, you do know that that 3% average growth over the century includes the falls at times like the Depression? That this is the growth rate after the hiccups?


Blog Review 914


The latest social democratic idea. The rich would really like to have higher taxes, so as to get off that hedonic treadmill. Sheesh.

An interesting question, what actually is the definition of economics?

It simply sin't how much you spend on education. It's how you spend it.

Quite joyous that the first set of regulations cause the effects that lead to the second.

Such as regulations to preserve the environment leading to its degradation.

"Ordinarily, when I disagree with the market, I assume that I am the one who is stupid." Usually a good call, but is it always?

And finally, there are some websites that are just a blessed relief.

A budget for jobs


According to the FT, Alistair Darling’s aides are "privately calling the April 22 statement a 'Budget for jobs'". Well, nice idea, but I'm sure they'll mess it all up by (a) coming up with some expensive and ludicrously complicated scheme for the private sector, while (b) boosting public sector employment at the unavoidable expense of lost jobs in the productive part of the economy.

Of course, if the Chancellor really wanted to do a 'budget for jobs' he could do so very simply by abolishing the employers' national insurance contribution. It's a perverse tax on jobs even at the best of times, but in a recession when unemployment is skyrocketing, it's just plain stupid.

In theory, of course, the abolition of employers' NIC would be a costly tax cut in terms of lost revenue. But in practice, I doubt the Treasury would lose very much at all. By effectively cutting labour costs by 12.8 percent, getting rid of employers' NIC would save countless jobs, and correspondingly reduce the amount being paid out in benefits. It would also make British companies far more competitive internationally, and in doing so help the economy to recover.

Balancing budgets


Earlier this week, Adam linked to the Economy League of Greater Philadelphia's Budget Challenge, which gives anyone and everyone the chance to try their hand at balancing Philadelphia's budget. I had a go last night, and found balancing the budget – which is currently projecting a $170m deficit – pretty easy. In fact, I ended up with a $81.1m surplus. Give it a go and see how you do.

In case you're interested, I kept funding for fire services and housing the same, and only reduced budgets for public health, policing, vehicles, and the city pension fund by 10 percent. City administration faced a larger cut of 20 percent, but biggest cuts were reserved for libraries, business licensing and inspections, and prisons, which all saw their budget cut by 30 percent. My reasoning was that Philadelphia has an unnecessarily large public libraries programme, that licences and inspections are annoying and pointless, and that far too many people currently get sent to prison for trivial drug offences.

I also raised the sales tax by 1 percent, which is why I had such a big surplus. However, had the website given me the opportunity, I would definitely have used that surplus to cut the taxes on business and employment – something which would undoubtedly have a very benign economic impact.

The only reason I point all this out is because it demonstrates that cutting government spending should not be nearly as difficult as most commentators suggest. As Tom has written before, given that public spending in the UK has doubled since 1997, savings should not be difficult to come by.  Indeed, this report by two ECB economists for the Fraser Institute suggests that if we could make the British public sector as efficient as the American, Luxembourgian, Japanese, or Australian ones, the UK could save almost £96bn a year without cutting any services.

Earth Hour: Sitting in the dark


A portend of the future will be visited upon the population of the earth this coming Saturday evening at 8.30pm: a planet with a seemingly limited electricity supply. WWF’s Earth Hour is hoping that over 1 billion people across the globe wilfully choose to sit in the dark for an hour and celebrate reducing their carbon emissions, briefly. This return to the Dark Ages signifies that there are many out there who hate life and mans achievements and wish to return to more simpler times.

After sitting around in the dark for an hour most people will then be reaching for the light switch creating a surge that the electrical grids will have to deal with. As an example the biggest in the UK was after the England West Germany World Cup Semi Final, a surge that measured 2800MW, meaning that come 9.30pm this evening supplies will most probably have to be bought in from elsewhere. But at least the message is put across to politicians, that there are many people out there who are willing to have their electrical supply rationed, something that they are willing upon themselves so that they can alleviate their own guilt and clamber atop the moral mountain.

But people please don’t switch off. Switch on, tune in and embrace and celebrate all of mankind’s achievements that have brought us to where we are via our unique adaptability to change. Such as clean coal and nuclear power true signs of the ingenuity of man. The ultimate goal has to be how to harness energy from fusion power, something we should be striving for rather than wasting our time sitting around in the dark.

Blog Review 913


There's insanity and then there's law making. Under the child pornography laws have a photo of yourself naked when you were under 10 makes you a sex criminal. More here.

Disraeli's right again. That lies, damned lies and statistics thing.

Yet more proof that Naomi Klein had it wrong. It's government that uses a crisis to increase its own power.

The 95th birthday of the man who has saved more lives than any other single individual.

Ooooh, so cynical about the ability of government to perfect regulation.

Odd corners of the bureaucracy, the Department of Sensitive Words.

And finally, (naughty words alert) talking back to the Great British Public.

Facebook spys


The Home Secretary's demand for access to our Facebook records is just the latest in a remorseless stream of spying that is turning us into a surveillance state. 

The government has delayed, but not shelved, plans to link up all the government databases so that our details could be zipped instantly around half a million civil servants.

Last month the Home Secretary was proposing to set up a database that would log every one of our phone calls, email messages, and Google searches. Google has already been forced to hand over information, under government threats. Police can already requisition CCTV footage, our cashpoint transactions and our mobile phone records – and together with traffic-camera information, these will show exactly where any of us are at any time.

Earlier this year, Liberty had to go to the European Court to fight for the right of innocent people, including children, to have their samples removed from the police DNA database – the biggest in the world, naturally. The police said they'd think about it.

The Home Secretary says it's all necessary to fight terrorism. But during the Troubles in Northern Ireland, people were free to move about – even from Ireland to the UK without a passport – and not be monitored all the time.

The danger is that things like our Facebook information will end up in the wrong hands. Already, hospital staff have been caught swapping online medical information on celebrities. Officials have used CCTV cameras to ogle female customers in shopping malls. The new child database will be accessible to 400,000 officials – let's hope there's not a paedophile among them. People put very personal information on Facebook, and it remains there. So if the rules change and the police can check your past postings, it could prove very embarrassing. The opportunities for abuse or blackmail are legion.

Dr Eamonn Butler's new book, The Rotten State of Britain, is now available to buy now. Click here to find out how.

Bailing on AIG


Executive Vice-President of American International Group’s financial products division, Jake DeSantis sent his letter of resignation to CEO Edward Liddy on Tuesday. Init he deplores the politicians who have outright condemned the employees at AIG, saying that those responsible for the mess quickly found other jobs and escaped the current dilemma. DeSantis feels as though current AIG employees should be supported rather than victimised, as they have been in the media the past weeks. The ones who stayed are committed to helping the company; DeSantis himself was working for a $1 annual salary, with the expectancy of a bonus.

The AIG bonus debacle has been quite nerve-racking for politicians, AIG executives, and American citizens. Reading this letter will allow citizens to see through politicians’ and the media’s attacks on all AIG executives. Not every employee is responsible for this crisis, and most of those still remaining are trying to re-stabilize the company. Are these the people we want to be victimising? Jake DeSantis appears to be a very intelligent and successful employee. He has also been with the company for over 10 years, so it’s quite a loss for the company. Whether you agree with the bonuses or not, we need not demonise all executives.

Brussels Dispatch: Gaia and the catallaxy

I have been trying for some time to develop an analogy of the economy in familiar terms that all people can immediately relate to; and noticed that there is an automatic reflex, in considering the environment, that human intervention is such that many unseen and malignant consequences will follow from even an apparently innocuous activity.

Furthermore, and most importantly, people seem to truly understand that there is no such single thing as ‘the environment’ – it is the sum total of billions of tiny interactions, that without any central planning, holds itself in check; but with human intervention, the whole thing can be knocked into disequilibrium.

There would be the most unassailable victory for the laissez-faire movement if people learnt the same innate awe and reverence for the purity of the free-market as they now have for the purity of the ecology: actions cause unintended consequences, whose chaotic effects reverberate – and magnify in amplitude – far beyond the locale of the original intervention.

Austro-libertarians are the militant eco-warriors of the free market.


Here are the Opening words of the Wikipedia article on the Gaia Hypothesis:

In the ecological  sphere an act…[or] a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen.  The other effects emerge only subsequently; they are not seen […].  Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favourable, the later consequences are disastrous, and vice versa.Whence it follows that the bad environmentalist pursues a small present good that will be followed by a great evil to come, while the good environmentalist pursues a great good to come, at the risk of a small present evil.

Here are the Opening words of Bastiat’s Essay What is Seen, and What is Not Seen:

The Austrian Business Cycle Theory  is an economic  hypothesis proposing that the free market  and the temporal  components of the economy (structure of production, natural interest rate, savings rate and investment rate)  are closely integrated to form a complex interacting system that maintains the supply  and demand  conditions through means of the price mechanism  in a preferred homeostasis […].  The hypothesis is frequently described as viewing the effects of government intervention  as an immeasurable destructive consumption .  The Austrians  and other supporters of the idea now regard it as a scientific theory, not merely a hypothesis, since they believe it has passed predictive tests.

Okay, so I switched these two articles and changed the key words.

Obituary: R. Max Hartwell


Friend of the ASI, active member and historian of the Mont Pelerin Society, died on March 14. Robert Higgs, Senior Fellow of The Independent Institute and close friend, has penned an obituary. To quote from it:

He was an outstanding economic historian and contributed greatly to the “Standard of Living Debate," defending the view that the Industrial Revolution, far from having been a Marxist nightmare for the working class, was the means by which they were gradually lifted from the poverty that had been their lot from time immemorial.