And also as ever, if you want to reduce inequality and also, not quite the same thing but close to it, raise the incomes of the working poor then what you should be agitating for is not more price fixing, but a return to full employment. Which, in this particular place and time, means arguing for less regulation of who may employ whom to do what and also arguing that the Federal Reserve should delay raising interest rates. For there are indeed things we can do to make the economy better but we do also have to make sure that they’re the right things.
– Tim Worstall, who is picking apart the thinking of the chief operating officer of Blackstone, the world’s largest listed asset management house. I have been to briefings where I have heard investment managers say that minimum wage laws are a good thing and have dismissed worries about unemployment, especially among minorities and the young, as unwarranted. What I fear is that there are now quite a lot of people working in the investment sector who have imbibed some “making water flow uphill” socialistic nonsense, and these folk now oversee our investment portfolios. It is definitely worthwhile spending time working out if the investment professionals in charge of your money subscribe to these ideas or not.
For a brilliant take-down of minimum wage laws, rent controls and other attempts to push up/reduce prices from where they might otherwise be, Henry Hazlitt’s Economics in One Lesson, over half a century old, is still a classic of devastating argumentation.
(Author’s note: corrected from the original where I wrote BlackRock rather than Blackstone. Mea culpa.)
“You can’t just continue growth for the sake of growth in a world in which we are struggling with climate change and all kinds of environmental problems. All right? You don’t necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers when children are hungry in this country. I don’t think the media appreciates the kind of stress that ordinary Americans are working on.”
— Bernie Sanders
“When I saw those shelves crammed with hundreds, thousands of cans, cartons and goods of every possible sort, for the first time I felt quite frankly sick with despair for the Soviet people. That such a potentially super-rich country as ours has been brought to a state of such poverty! It is terrible to think of it.”
— Boris Yeltsin
Post inspired by reading the story of how Boris Yeltsin went grocery shopping in Clear Lake, Texas, and discovered that perhaps socialism wasn’t all it was cracked up to be.
See also: the latest on the paradise that is Venezuela.
Monopolies are only sustained by force. Sometimes examples are useful.
In his book The No Breakfast Fallacy, Tim Worstall relates how in 2010 China limited the supply of rare-earth minerals to force the price up. The only problem was that rare-earth minerals are not rare at all, and the increased prices meant that Lynas Corporation and Molycorp were able to raise finances to re-open some mines that had been previously closed due to the previous low prices from China.
Today, Imprimis Pharmaceuticals announced that they are making for $1 an alternative to the drug Daraprim, in direct response to Turing Pharmaceuticals increasing its price from $13 to $750.
Update: Tim Worstall wrote about the Daraprim and rare-earths in Forbes. I hadn’t seen it when I wrote this, honest!
The idea that there is a fixed amount of wealth is a pessimistic fallacy held by cod economists. The idea that there is a fixed amount of stupidity is an optimistic fallacy held by cod psychologists. New forms of stupidity are being generated all the time; and this process is not the least hampered by old forms of stupidity continuing to flourish and even spring up anew in places from which naive observers had thought that particular species of stupidity had been eradicated.
The Guardian newspaper is a sort of Rare Breed Survival Trust for economic and political stupidity. It works to secure the continued existence and viability of endangered falsehoods. Heartwarmingly, its labours often meet with success and stupid ideas once considered moribund can thrive again. Not thrive in terms of achieving anything worthwhile, of course, because the ideas concerned are stupid, but in terms of being loved.
Let’s look at a case study of a fallacy brought back from the brink of extinction to flourish once again in the pages of the Guardian. I refer you to an article by Zoe Williams entitled “Poverty goals? No, it’s extreme wealth we should be targeting”.
Furthermore, as Martin Kirk from the activist network the Rules pointed out, all the language of sustainable goals frames poverty as a disease: eradicable, no match for the ingenuity of mankind, but fundamentally nobody’s fault. It is a landscape where everyone’s a hero and nobody’s a villain; one in which unfair trade agreements, land grabs, structural debt relations, privatisation of publicly owned utilities and tax evasion never happened.
Poverty is not a naturally occurring germ or virus; it is anthropogenically created though wealth extraction. Any goal that fails to recognise this is not only unlikely to succeed, but can only be understood as a deliberate act of diversion, drawing attention away from what might work; in its place, the anodyne, fairytale language of hope, in a post-ideological world where all politicians just want what’s best and a billionaire is just a benefactor you haven’t met yet.
Licensing laws tend to have particularly harsh consequences on members of minority groups for a couple reasons. First, if a law requires a person to have, say, a college degree to practice the trade of interior design (which is the law in Florida), people who have less money and time to spend in college will find that avenue of opportunity closed to them. Since black and Hispanic Floridians are about 30 percent less likely to have a college degree, they will suffer more from this absurd licensing requirement than others will. Competitor’s Veto laws that forbid a person from practicing a trade unless they get permission from the businesses already operating in that industry are also very likely to create a sort of Old Boys Network, and to exclude entrepreneurs who lack political connections. Second, in a more general sense, any law that restricts economic opportunity for some to benefit others—as licensing laws tend to do—are likely to benefit those who have more political influence and can therefore get the government to regulate in ways favorable to them. Since members of minority groups have less political influence, they tend to be the ones excluded.
– Timothy Sandefur
If reports are true, the Finnish tax police want the public to report anyone selling a take-away pizza for less than €6.
“Unless a pizza is on temporary sale there is no way a legitimate establishment can offer pizza for less than six euros,” Det Insp Minna Immonen of the Uusimaa police department is quoted as saying.
So they have calculated that it is not possible to remain in business selling pizza for less than that price, and still pay the 12% VAT.
12% VAT? What a pleasantly low rate, here in the UK it is 20% for almost everything. I will not be diverted onto a discussion as to what is standard or zero-rated, except to note that on learning that horse semen is subject to normal VAT but bull semen is zero-rated (effectively exempt) as in most of Europe horses are not ‘food’, I decided that whoever made that ruling in Brussels bloody well deserved that to be their legacy.
However, the intrusion is greater, you should get a receipt for your pizza, so Finland has joined Italy as a place where every transaction (even a 1€ cup of coffee or Sachertorte in Venice) leads to a receipt being printed at the till, for fear of the Tax Police.
Police are trying to crack down on the “grey economy”, which costs the country millions of euros in lost tax revenue each year. They also want people to make sure they get a receipt for their pizzas, regardless of value.
We all surely know that the ‘country’ is in fact ‘the State’, and those millions of Euros of lost revenue go on to lead happy, productive lives in the private sector in the hands of their owners. It is a sorry state of affairs when price signals are used by tax authorities to go looking for suspects, rather than customers for bargains, perhaps the tipping point from a tolerably free society to an unpleasant one. I do recall the Sage of Kettering remarking years ago that someone had calculated that no business could carry on in New York City if it followed all the regulations that apply to it.
Still, this has generated some scorn, so that is a positive sign.
I have been re-reading Mark Steyn’s amusingly-written prediction of America’s coming Apocalypse, noting those parts where his predictions seem to be on course (debt, rising bureaucracy) and those which suggest there’s more vigour in that country than the doomsters suggest (fracking, the continued innovations of its businessmen and women, etc). I am not on the same page with Steyn about everything – he is more of a social conservative and culture pessimist than I am, but most of his points hit home or at least are a spur to change course. There is a laugh-out-loud paragraph on every page and this one in particular, on page 75, caught my eye. Steyn writes about the “stimulus” programme of the Obama administration:
“What sort of jobs were “created or saved”? Well, the United States Bureau of the Public Debt is headquartered in Parkersberg, West Virginia – and it’s hiring! According to the Careers page of their website: `The Bureau of the Public Debt (BPD) is one of the best places to work in the federal government. When you work for the BPD, you’re a part of one of the federal government’s most dynamic agencies.'”
“Most dynamic agencies”.
Have a good weekend.
Not only is the capitalist system not responsible for the latest economic crisis, but all attempts to severely hamstring or regulate the market economy out of existence only succeeds in undermining the greatest engine of economic progress and prosperity known to mankind.
– Richard Ebeling
Uber has been hit with complaints that it’s running “an Objectivist LARP,” a live-action role playing of a capitalist utopia from an Ayn Rand novel. That’s pretty much what it is doing, and the results are awesome. And the benefits don’t stop with more drivers and lower rates. Uber is ploughing a fair portion of its profits into another wave of technological innovation — self-driving cars — that promises to offer even greater improvements in the future.
All of this should counter some of the despair about how to promote free markets, especially among urban elites who have been programmed by their college educations to embrace the rhetoric of the Left. Give them half a chance, and they will flock to capitalist innovations run according to the laws of the market.
The problem is that they don’t want to admit it. That’s where the euphemism “ride-sharing” comes in. To cover up the capitalistic nature of the activity, they tell themselves they’re “sharing” something that they are quite obviously paying for, and paying at market rates. Imagine what could be accomplished if they were just willing to drop the euphemisms and embrace the free market.
– Robert Tracinski
The ‘mining giant’ Glencore, a commodity trader/mining company formed in the heat of a commodity price boom a few years ago, appears to be encountering some difficulties, of the sort that you find when your debt exceeds the value of your assets. The current instar of this company formed as commodity prices ‘boomed’ (for no obvious reason it would seem, it was on the back of a rather well-noted ‘recession’), with a take-over of the Anglo-Swiss commodity trader/mining company Xstrata in May 2013. Now, however:
Hunter Hillcoat, an analyst at Investec, said: “Mining companies gorged themselves on cheap debt in a race to grow production following the Chinese stimulus that occurred in the wake of the great financial crisis.
“The consequences are only now coming home to roost, as mines take a long time to build.”
The CEO of Glencore, Mr Ivan Glasenberg, is certainly a very capable and impressive individual, and had, when younger, been a world-class race-walking athlete, barred from international competition by his South African citizenship. We were even fed stories of how, when he paid his income tax in the Swiss village he calls home, Rüschlikon, the locals got a rebate on their income tax (how distasteful, why not cut taxes for the man himself with a cap on total take, like the Isle of Man?)
Could it be perhaps that the monetary policy of the Federal Reserve, followed by others around the world, had created an illusion of value in the mining sector, that led to what (for now) might appear to be a prodigious mal-investment, as commodity prices fall?
Mr Glasenberg has followed the ‘price signals’ coming from the markets in building up the company that he manages. Now, however, the price signals may well have been a mirage. What if debt had not been ‘cheap’? Might this company now be in better shape? Wouldn’t almost any Austrian economist have said, back when this merger was being contemplated, that commodity prices were a bubble (and that they still are)? Would anyone involved, blessed with some foresight, economic knowledge and patience, have said ‘Let’s wait for the bust after the boom before deciding what to do next.‘.
(Of course, the boom in money hasn’t ended yet, it’s just that the prices have stopped moving up for now). Then again, why should those involved care?
Now consider that lesson right across the world, what might it look like if ‘cheap debt’ had never existed, but only debt that came, not from creating money from nothing in a fiat money system via Central Banks, but via borrowing others’ savings, which were not being spent elsewhere? Everything from the cost of a home’s rent or mortgage, to the cost of the metal in a nail on your wall, might be different. What might that world look and be like?
I came across this quote on Facebook by a person whom I won’t name – since it was on a closed group – and it was written in response to an item about tax as a cost. The idea that tax is a cost struck this person (who I don’t think was trolling, but just holding collectivist views) as bizarre:
“Taxes are redistributed throughout the economy. Taxes provide public services and government spending that consumes goods/services and pay public sector wages that fuel business success which in turn, creates further tax revenue. You’re mistaken – Tax is not a cost – It drives nigh on 50% of our entire economy! Right wingers continually fail to notice this incontrovertible economic fact.”
The idea that taxes cut into existing productive activity, and that as a cost, will be passed on to consumers (such as the financial transaction tax passing on costs to bank clients, shareholders, etc) doesn’t occur. No, taxes are part of that wonderful magic money tree. Why stop at a pathetic 50 per cent? Why not tax the lot? Give it all to the State, so those clever people can spray it around and make us richer, except of course the money has that odd way of disappearing from our paychecks……..Sorry, excuse me, time for my pills.
You do have to wonder what a century or more of compulsory education has wrought.
Today’s Sisyphus is China. More particularly, the Chinese authorities. They are determined to roll that boulder uphill. The path of least resistance for the boulder, however, is downward. Gravity, after all, is a bitch. The Chinese stock market is still comparatively young, and as stable as any toddler overwhelmed by parental expectations. With their boulder beset by the giant suck of gravity, China’s Sisyphus first cut rates, and trimmed banks’ reserve ratios.
The boulder continued to roll downhill.
– Tim Price