Creating more value in an economy would do more than wealth redistribution to combat the harmful effects of inequality.
- Tyler Cowen, in a review about a much-discussed book by Tom Piketty on the subject of inequality. Piketty favours a lot of heavy state activity to control and reduce said inequality. Now, it is easy to just default to the standard libertarian line and say that fretting about such inequalities is just an excuse for a statist power grab. The fact is that the sheer gap in wealth we can see today is a reason why, however mistakenly, idealistic, smart people are fearful of, and hostile towards, laissez-faire capitalism. So it is worthwhile to keep making the economic, philosophic, and political case for why coercive measures to reduce inequality is bad and dangerous.
I could not resist adding in this paragraph from Cowen:
The simple fact is that large wealth taxes do not mesh well with the norms and practices required by a successful and prosperous capitalist democracy. It is hard to find well-functioning societies based on anything other than strong legal, political, and institutional respect and support for their most successful citizens. Therein lies the most fundamental problem with Piketty’s policy proposals: the best parts of his book argue that, left unchecked, capital and capitalists inevitably accrue too much power — and yet Piketty seems to believe that governments and politicians are somehow exempt from the same dynamic.
Money buys success in football and several clubs now have more money than United. From 1997 through 2004, United topped the consultancy Deloitte’s “rich list” of European football clubs ranked by revenues. In 2012-13, United dropped out of the top three for the first time since Deloitte began compiling the list. Real Madrid, Barcelona and Bayern Munich now have higher revenues. Moreover, Chelsea, Manchester City and Paris Saint-Germain have oil-rich owners who pump money in rather than sucking it out. By the logic of the market that means there are six clubs in Europe more likely to win the Champions League than United. In the domestic league, by the same logic, the club’s natural position is now third behind Chelsea and Manchester City. (Less wealthy Liverpool will probably win this season’s Premier League, but their overachievement is probably unique in recent English history.) United’s biggest problem isn’t David Moyes. It’s money.
- Simon Kuper, writing about the sacking by Manchester United today of David Moyes, manager since last July. Kuper, who writes in the Financial Times, has also co-authored a study examining the linkages and correlations between success on the field and money in the bank. Short summary: the link is very strong but not totally bomb-proof. (In other words, if you support a relative minnow as I do, you can still live in hope.)
Assuming this data is accurate and sustained (a big assumption, and the usual caveats must apply), this sort of item is going to make the nanny statists out there feel very uncomfortable:
In recent history, the UK has liberalized its rules concerning the hours that pubs can operate. For example, the Licensing Act of 1988 expanded Sunday hours and no longer required pubs to close for two and a half hours in the afternoon. In 2005, the law in England and Wales was further liberalized such that pubs could remain open until 5 am instead of closing at 11 pm. An article in the latest issue of the Journal of Health Economics claims that the 2005 liberalization of pub hours actually decreased the number of traffic accidents.
So writes James Schneider, over at the Econlog economics group blog.
Here is another excerpt:
The reduction in traffic accidents for England and Wales are plausibly related to the change in pub hours because the largest reductions occurred during weekend nights and early mornings. The impact on young drinkers was particularly strong. Accidents involving young people on Friday and Saturday nights decreased by an estimated 32.5 percent.
So there is evidence, perhaps, to confirm a general, common-sense sort of view that if you treat adults like adults, they behave accordingly. It is interesting that the message of this article is as troubling for the paternalist Right as it is for the Fabians on the left. I remember reading some time ago the author Theodore Dalrymple, who has made something of a name by lamenting the alleged ghastliness of modern life in the UK, reticent past, having a pop at liberalised pub hours. The Daily Mail, for example, regularly has a go and rarely fails to write stories about how we Brits are living in a sea of booze.
And yet it turns out that there has been a coincident sharp fall in road accidents on one hand, and looser licensing laws, on the other. It should be borne in mind, though, that recent years have seen a continued strong enforcement of drink-drive laws; police are pretty tough on speeding in general; there may be, for demographic reasons, just fewer tearaways on the roads in general. On the other hand, our island is more crowded than it used to be and our roads are busier, so you might think there would be more risk of accidents, not less. And yet the number of accidents, including fatal ones, has fallen.
Correlation is not causation. It is, however, worth noting that had the number of road accidents risen significantly at around the same time as our drinking laws had changed, I think I can imagine how organisations such the British Medical Association, The Lancet, and other campaigners would have used such sets of data.
Nicholas Dykes, someone I have known for many years, and who is the author of several excellent novels - as well as essays such as this pugnacious and scholarly piece about Karl Popper - emailed me the other day to make it clear that his absence from the airwaves did not mean that he was no more.
Over to you, Nick:
Sorry I haven’t been in touch. I had something called a subarachnoid haemorrhage, a rarish kind of stroke, at 6.30 am on Sunday 24 November, falling on the floor in front of my wife and making horrible noises in my throat. Happily she’s good in a crisis and with the help of a kindly neighbour had me in an ambulance pdq. I was taken first to Hereford, then to a new Hospital in Birmingham, the Queen Elizabeth, where I was operated on next day. The NHS has its moments.
I had 2 operations. Then I got pneumonia. Then I got an infection of the brain called ventriculitis. Some cheery medic said at one point I’m lucky still to be here. I was in and out of Intensive Care, five weeks in hospital altogether, then had to go back in again with a mini stroke called a TIA just a few days after being let out.
Anyhow, I’m home again now and recovering slowly. I was weak as a kitten to begin with, slept a lot, and had great difficulty with my balance — very wobbly walking. Things are better now but my short-term memory is not too good. Happily, my speech is alright and I have not been left with any physical disabilities other than weakness, which should improve. I do have a handsome scar on my forehead however, it looks as though someone hit me with a axe.
My poor wife Rachel had a miserable time for weeks, not knowing how I’d be from day to day and with tubes sprouting all over my body. As for me, I was largely unconscious and remember very little! When I first woke up and was told what had happened, all I said was: ‘what a bugger!’
The best of recoveries to you, Nick.
This is from that haven of supercilious argumentation, the Financial Times:
Only The Ignorant Live In Fear of Hyperinflation. (Paywall protected). The article is by Martin Wolf, whose confidence in the benign force of central banking remains undimmed, nay, is enhanced, by the events leading up to and after 2008.
Here are a couple of paragraphs that I can extract for you:
Understanding the monetary system is essential. One reason is that it would eliminate unjustified fears of hyperinflation. That might occur if the central bank created too much money. But in recent years the growth of money held by the public has been too slow not too fast. In the absence of a money multiplier, there is no reason for this to change.
In other words, if the ignorant masses can be told about how spiffing modern fiat money systems are and how they are managed, we’d be all a lot happier.
A still stronger reason is that subcontracting the job of creating money to private profit-seeking businesses is not the only possible monetary system. It may not be even the best one. Indeed, there is a case for letting the state create money directly.
Put the state in charge of increasing/cutting the volume of money in the system. I am sure that will work like a charm. What could possibly go wrong?
Okay, enough of my sarcasm. Now, it may well be that fears of hyperinflation are unwarranted. It is entirely possible that in the West, we face a Japan-style multi-decade period of stagnation rather than hyperinflation. The structure of the economy, even demography, can have an effect on how quickly/slowly money moves around the system. Despite various central banks – particularly in the case of Japan – printing money in vast amounts, it may be that we should not be concerned about what the State is doing, and continues to do, to money.
But it is worth noting that since 1971, when Nixon severed the gold link to the dollar, although that link had been dead in all practical terms for a while, the dollar has lost about 85 per cent of its purchasing power. And much the same can be said of the fiat money systems in force around the world. No doubt the FT thinks this is nothing to bother about. Weimar? No chance of that happening again, old boy. Too many clever people working in the central banks to let that happen again. Trust us, stop worrying and it will all come out in the end.
The irony, of course, is that people who tell us to stop fretting about the central bank buggeration of money and the need to put even more State control over all this are the same as those who say it is folly not to be scared witless by AGW, or by whatever fashionable panic happens to be out there (particularly when it is associated with calls for governments to “do something”). But if people are fearful of something caused by states with their monopoly powers, then the FT’s reaction is a typical example of what we get.
Today’s big political story in the UK is the resignation, due to expenses she had claimed, of Maria Miller. Her ministerial post had been that of “Culture Secretary”; her brief had included the role of regulation of the media, and the whole wretched power-grab known as the Leveson Report.
It won’t have occurred to most of those in the Westminster Village who write and chat about such things, but for me, as a slash-and-burn small-government type, what I’d like to think of is that we get rid of such an Orwellian-sounding post as “Culture Secretary”.
The business of sport, media and the arts should not be under the control, or even vague oversight, of the State, in my view. Since when, for example, have the doings of Premiership footballers been the proper concern of politicians? In an age of crowdfunding platforms, and due to the continued philanthropic involvement in such matters, as well as plain good entrepreneurship, why should money be forcibly taken from people in tax to spend on art galleries or whatever? Why should a state interest itself in how the television industry is run (abolish the BBC licence fee, etc)? Getting rid of this ministry would be a part of a wider retrenchment of the State to what arguably are its core functions. At the very least, the scrapping of this post, and the associated quangos it deals with, would signal that we haven’t given up on the noble idea of rolling back the State.
Needless to say, I am dreaming impossible dreams. It may have something to do with it being such a gloriously sun-kissed April morning here in London.
“Those soaring incomes of the top 0.01% are only going to apply to those very few indeed who can make that leap from performing on the national to the global stage. And there’s really not enough of such people that I think it’s something that we’ve got to worry about. 0.01% of the US population is, for example, 3,000 people. Seriously, what does it actually matter to the rest of us what they earn? Especially as they’re not earning it by moving from taking 10 cents each to a $1 each off each of us 300 million, they’re doing it by moving from taking that same 10 cents each of each of us and then making up the other 90 cents by taking fractions off the other 7 billion people on the planet. As I say, this isn’t a foolproof, watertight, explanation of what’s going on. But now we’re seeing that it is the top 0.01% taking that extra income the evidence is at least consistent with my explanation. That it’s all being driven by globalisation: and as such there’s not a dang thing we want to do about it.”
- Tim Worstall. Yes, you may have noticed that I spell globalisation with an s, not a z. Pax Americana hasn’t yet spread to my London-based laptop.
Here is an excellent piece from The Libertarian about how to think about what is going on with Russia, Ukraine, etc, and the response to it of various people, including those who fall into the trap of “my enemy’s enemy is my friend” fallacy. Other fallacies are addressed such as “who are we to judge X?” and “it’s just not our business” positions.
“Hardly anybody has heard of the Roman poet Juvenal these days, which is a great shame. He was the first, as far as we know, to ask one of the central questions of political philosophy: “Who will guard the guardians?” He was rightly paranoid, arguing that someone must watch the watchmen, those who are entrusted to look after us – such as, to pick one example at random that he couldn’t possibly have conceived of, the Financial Conduct Authority (FCA). The problem, of course, is who will watch those who watch the watchmen? But Juvenal’s realism is not shared in the current political culture. We tend to assume that regulators are self-evidently superior to profit-seeking capitalists. Unlike the supposedly rapacious bankers, our regulator-kings are thought to be motivated by higher aims: the pursuit of the common good and other disinterested, noble goals. Not for them power or pay hikes.”
- Allister Heath.
He is talking about the FCA’s recent impact on the UK insurance industry. Not exactly stellar performances from the regulator. But then with all such bureaucracies, the “mission-creep” problem exists. Dragons are sought to be killed, mountains are built to be climbed. The FCA, like its counterparts in most other developed nations, is constantly looking to “consult” on new initiatives, such as cracking down on such naughtiness as “peer-to-peer” lending and crowdfunding; its recent regulatory overhaul on the UK wealth management sector, through what is called the Retail Distribution Review, has led a number of firms to drastically increase the minimum sums of assets a potential client must have to be taken on, creating what is called the “financial orphan” problem. The FCA’s predecessor, the Financial Services Authority (part of that organisation’s powers were sent back to the Bank of England by the current UK government about two years’ ago) was not particularly prescient or effective in heading off the sub-prime debt disaster, although no doubt some of its officials had worries.
The issue, as Allister Heath says, to remember about such organisations is not to single out individuals for wrath; some of them are highly intelligent and diligent people. I think it was Hayek or Friedman (Milton) who cautioned champions of free markets against the ad hominem fallacy of bashing civil servants. Rather, they said, if you create bodies with sweeping powers, and create incentive structures for empire-building, then this is the sort of problem you get. To take a different case, look at how the US War on Drugs, and greater budgetary powers, has led to the militarisation of US police.
The problem with the FCA is that it exists. Had we stuck to an order where laws were strictly enforced against force and fraud, and where people were enjoined to remember “let the buyer beware”, rather than treat consumers of financial services as nervous children, we’d be a lot better off. Yes, financial services can be complex, and yes, some of them sound very odd (try explaining financial derivatives to your average Joe). But in general terms there is no more reason why sales of such services should require any more state oversight than the sale of groceries or bathroom fittings.
So the mitigation deal has become this: Accept enormous inconvenience, placing authoritarian control into the hands of global agencies, at huge costs that in some cases exceed 17 times the benefits even on the Government’s own evaluation criteria, a global cost of 2 per cent of GDP at the low end and the risk that the cost will be vastly greater, and do all of this for an entire century, and then maybe – just maybe – we might save between one and ten months of global GDP growth. Can anyone seriously claim, with a straight face, that that should be regarded as an attractive deal or that the public is suffering from a psychological disorder if it resists mitigation policies?
- Andrew Lilico.
“There’s nothing like a bunch of unemployed recent college graduates to bring out the central planner in parent-aged pundits.”
- Virginia Postrel.
There may indeed be what US law professor and uber-blogger Glenn Reynolds calls an education bubble in the US (and for that matter, here in the UK). That does not, however, mean that studying a “liberal arts” degree is somehow shameful or pointless, and yet that is the impression I sometimes get on part of the right-of-centre blogosphere. By all means let’s cut the state education establishment down, but that is utterly different from the argument about education per se and ideas about how people should broaden their horizons culturally and intellectually. It is important that libertarians/classical liberals understand that distinction, and make it often.
We’ve all felt that need to tell the hard truth. Assert the raw and unadorned core repeatedly and dogmatically. React with righteous anger and fury, even without elaboration, to the point of being downright offensive. There is a role for this. Injustice in our midst — and there is so much of it — cries out for it. I wouldn’t call this brutalist. I would call this righteous passion, and it is what we should feel when we look at ugly and immoral things like war, the prison state, mass surveillance, routine violations of people’s rights. The question is whether this style of argument defines us or whether we can go beyond it, not only to lash out in reaction — to dwell only in raw oppositional emotion — but also to see a broad and positive alternative.
- Jeffrey Tucker, whose recent essay on what he sees as being the less charming features of libertarian commentary has provoked quite a storm, thereby validating his point.