When I was a teenager doing GCSE Science we had a guest speaker come in and talk about what I now know to be The Limits to Growth. We were told about peak oil and how oil production doubles every n years and blah blah blah and it sounded pretty convincing at the time. Fortunately I did not pay it much heed, much as I instinctively did not really care about acid rain or the hole in the ozone layer which were the subject of geography lessons around the same time. It was not until years later I found out about the Club of Rome. I still do not know how, exactly, that guest speaker came to be in that science class, but in retrospect it sounds pretty sinister.
I like the band Muse. Their
latest 2012 album is called Thermodynamics The 2nd Law and includes the song “Unsustainable”. It is really annoying when the creator of art you enjoy starts spouting crappy nonsense politics. Anyway, the song contains a recording of someone saying:
The fundamental laws of thermodynamics will place fixed limits on technological innovation and human advancement
In an isolated system the entropy can only increase. A species set on endless growth is
Of course, as someone at genius.com points out, we have the sun, which should last long enough.
I was reminded of all this in an instant messenger chat with Perry Metzger today. He was talking optimistically about solar power. I did a search to check that I was not just imagining that anyone ever took second law arguments about economics seriously. I found a paper.
…we shall examine some challenges which have been made to the limits to growth (Limitationist) position by those criticizing the scope and application of the second law of thermodynamics and we shall in turn defend Limitationism against these criticisms.
Perry M said, “if all else fails, we can always use the hot air produced by leftists as a power source indefinitely.” I shared that link. He replied, “that paper alone, Rob, could power London for a month.”
An argument I have come up against recently, in this apocalyptic book by James Rickards, is that free trade, as classically defended by David Ricardo with his famous Law of Comparative Advantage, only works in theory because the freedom to move capital and factors of production around means the “playing field” of the market is never “fair”, hence tariffs/other controls are just to re-set the game. Straight off, this sounds bunk to me, not least because free movement of capital is part of what capitalism (clue is in the word) is all about. Capital, both in its physical and human form, goes to places where it can earn the highest rate of return. This is how, to summarise massively, we got from the caves to the skyscraper. If a businessman cannot use his capital where it works most effectively, it would render much investment pointless.
And if it is wrong for capital to move around because it somehow undermines some sort of “fair” trade, then this applies not just to between nations, but inside them, too. Ah, but I hear the Trumpistas cry, what about those evil currency manipulators gaming the system in their favour? The answer is that if the Chinese or others want to send us cheap stuff, made even more dastardly cheaper by currency manipulation, it means consumers don’t have to earn so much to buy imports. True, in the short-term it means that some jobs will be lost because of the cheap imports, but then again the pay packages of millions of consumers stretch a bit further. The pain of the affected industries is easy to see and makes for great TV and campaign spots for a Donald Trump or Bernie Sanders (whose views on trade are identical); the costs to consumers from protectionism is not easy to visualise. Also, if China, for example, sells or “dumps” cheap steel on the world market, manufacturers in the West who use steel will see their costs fall. It is worth nothing that when in the early Noughties George W. Bush slapped tariffs on steel, it “saved” some US steelmaker jobs, but cost many jobs in sectors where steel is a factor of production.
Finally, here are more thoughts on the idea that free capital movement somehow dents the case for trade trade, via Gene Callahan over a decade ago:
An honest advocate of free trade must admit that there will often be people who are made worse off, at least in the short run, by the freedom to trade internationally. But the same is true of trade within the borders of a country: If you open a restaurant near to and better than mine, my business will suffer.
It might be pleasant to live in a world of unlimited resources, where everyone who wanted to run a restaurant could do so without having to compete for customers’ scarce dollars. But since we don’t, the fact that my situation might worsen because of your business activities is an unavoidable consequence of the freedom to buy from and sell to whomever one wishes. If we try to prevent all such unpleasant outcomes, we will eliminate the market economy and regress to a hand-to-mouth existence.
Sometimes I observe a public discussion and notice that each side is talking across the other and neither side is understanding. I wonder if a change to the language of the debate might be constructive.
When Donald Trumps talks about making Mexico pay for the wall by imposing a 20% tariff on imports from Mexico, the left rightly point out that this means that Americans will pay for the wall. Similarly, those who want the UK to remain in European Union talk about the importance of trade. Nearly everyone agrees that tariffs are bad and trade is good. But dig a little deeper and soon it becomes clear that people are not talking about free trade at all. They are talking about the kind of trade that involves hugely complicated and interventionist multilateral treaties between governments.
I often try to explain that I am in favour of free trade and that we do not need people in government to make complicated deals: we just need to leave people alone and they will trade with each other. I am met with various objections. Exporters will suffer because foreign governments will increase tariffs and people in foreign countries will find it too expensive to buy British goods. Foreign governments will subsidise production and people in foreign countries will be able to sell things cheaply to British people; so cheaply that British people will stop buying things from British companies until those companies go out of business. At this point the foreign people might put up their prices and if they time it right the prices might never go down again because skills required to restart British companies might be lost.
My answer to these objections is that people are clever and they will find ways to make the most of the new situation. But it will be a situation in which people are, on the whole, richer than they were before. Cheap foreign goods make us richer. Not exporting things frees up labour to do other useful things.
But I can not deny that in the short term people will lose jobs and will struggle to find new things to do. My arguments are all about how people can get richer in the end. People who think the government can help with trade want to help the man who works in the widget factory and wants to be still working in the widget factory tomorrow.
Some Trump supporters and some people in favour of the UK leaving the European Union want to reduce immigration. I am in principle in favour of freedom of movement. I would argue that the ability of people to move to where there is demand for their labour makes production cheaper and everyone richer. But I can not deny that people moving around can make life uncomfortable for people staying still if the people staying still find their wages going down as a result. It is certainly not helpful to make accusations of bigotry in the face of such concerns as people on the left often do.
It might turn out that we all agree about what happens when people are free to move and trade, we just have different time preferences.
Interestingly, some of the same people who object to unilateral free trade are also in favour of freedom of movement, even though it is equivalent to unilateral free trade in labour.
“Economies are dynamic, complex systems. They are most strong and productive over time when they are free to adapt to new realities, circumstances and changing patterns of supply and demand. Was UK mining truly protected by overt government decisions to buy domestic coal in the late 1970s or early 1980s? Or was that protection merely insulating the industry from the competition of cheap natural gas, meaning that when the protection was withdrawn, the industry collapsed?”
– Ryan Bourne.
Ruth Potts, writing in the Guardian with a quill pen, says that,
…a deeper understanding of humankind’s place in a living world of materials suggests the need and opportunity for a different kind of love affair with “stuff” – a long-term relationship of appreciation, slow pleasures, care and respect.
Instead of abstinence and austerity, embracing the New Materialism could have profoundly positive effects. Inverting classic expectations of productivity in which fewer people produce more stuff for consumption, the New Materialism points to an economy in which, in effect, more people produce less stuff for consumption.
There are other steps we can take to accelerate this healthier relationship with stuff: a minimum 10-year guarantee would help end the scourge of built-in obsolescence. Community Supported Agriculture reconnects communities with the people who grow food. The same approach could be applied to more of the objects we use: Community-supported potteries could deliver tableware, gradually, by subscription. The same could apply to clothing and furniture. A culture of repair and re-imagining would create ample skilled employment; high street making and mending hubs could bring life back to the hearts of our towns and cities.
Speaking as the last woman in England who can properly darn a sock, I know well the pleasure to be had from “make do and mend”. Darning is quite satisfying. By plying my darning needle I have kept going heirloom socks knitted by deceased great aunts. I have been known to darn a hole in a beloved Fair Isle jumper in multiple colours of antique darning wool, which I acquired from an eBay seller in France. Don’t think I don’t see the appeal of caring for a dear old thing rather than buying a rubbishy new thing.
But that appeal is strictly contingent on it being a hobby not a necessity. For generations of women, darning was the most wretched of tasks, ruining their eyes and wasting their lives trying to eke out a little more use from a garment that was certain to “go” again almost on the next wearing. Men had it no better. George Orwell wrote in Homage to Catalonia of seeing the type of tools in use in 1930s Spain:
A broken ploughshare, for instance, was patched, and then patched again, till sometimes it was mainly patches. Rakes and pitchforks were made of wood. Spades, among a people who seldom possessed boots, were unknown; they did their digging with a clumsy hoe like those used in India. There was a kind of harrow that took one straight back to the later Stone Age. It was made of boards joined together, to about the size of a kitchen table; in the boards hundreds of holes were morticed, and into each hole was jammed a piece of flint which had been chipped into shape exactly as men used to chip them ten thousand years ago. I remember my feelings almost of horror when I first came upon one of these things in a derelict hut in no man’s land. I had to puzzle over it for a long while before grasping that it was a harrow. It made me sick to think of the work that must go into the making of such a thing, and the poverty that was obliged to use flint in place of steel. I have felt more kindly towards industrialism ever since
That’s because Orwell, though a Socialist, had trained himself to the habit of opening the door when reality came knocking. Ms Potts has not. Every pretty vision she describes, the minimum ten year guarantee, the “Community supported agriculture”, the idea that “Community-supported potteries could deliver tableware, gradually, by subscription” (sounds lovely, all the family sharing one plate while waiting for the rest to arrive); they all boil down to deliberately making things more expensive and people poorer.
But the kind of protectionism that Trump appears to crave creates even more – including the very people it is intended to help. Consumers pay more for goods. Less wealth is created. The arteries of exchange, of innovation, of prosperity, become choked.
To her great credit, Theresa May grasps these truths – hence her refashioning of Brexit this week as a chance for Britain to turn its face to the world. To his great discredit, Donald Trump does not. (Although there are any number of CapX articles that could enlighten him.)
In that farewell address, America’s first President expressed his faith “that the good sense of our countrymen will guard the public weal… and that, although we may be a little wrong now and then, we shall return to the right path with more avidity”.
On many issues, Donald Trump has yet to choose his path. But on trade, it is crystal clear that he is going down the wrong one.
– Robert Colvile
By definition, a customs union is an agreement between countries to embrace tariff-free trade between members but impose common tariffs on goods imported from non-members. At an EU-level, this means a Common External Tariff (CET), a dizzying array of over 12,651 different taxes (and some quotas to boot) imposed on goods from the rest of the world. The long and short of it is that the EU is internally trade liberating but outwardly protectionist.
– Ryan Bourne
Yesterday, at my personal blog, I expressed extreme gratitude to Christian Michel for letting me talk last Friday, at his home, on a subject which, when I first floated it to him, must have seemed very vague and vacuous, although judging by what he said about my talk afterwards, he was almost as pleased by it as I was.
Tonight, I will be attending another meeting organised by Christian Michel, partly out of gratitude for last Friday’s meeting. There is a London tube strike happening today, and I am pretty sure that Christian is now feeling a bit nervous about attendance, so I will make a point of being there.
The title of tonight’s talk is “The Collision of Fintech and Traditional Banking”. The speaker will be Sasha Karim. (I’m guessing that this is the Sasha Karim mentioned here.)
I am hoping that what Sasha Karim will say is, among other things, that, by radically lowering transaction costs and thereby making the life of a “financier” (formerly only available to ultra-clever (but not necessarily ultra-wise) people who had access to or who were attached by ultra-rich (but again, not always ultra-wise) employers to expensive machines in expensive buildings) “fintech”, aka the new world of financial transactions on mobile phones, now available to all people who are above dirt poor, is creating a world in which the old dream dreamed by the likes of Friedrich Hayek of denationalised money, can become a reality and rescue us all from the great catastrophe that has been governmentalised fiat paper currencies, of the sort denounced by another friend of mine, Detlev Schlichter. We shall see. But maybe I am being too optimistic, both about the talk and about the world. Concerning the talk, I will report further.
Hayek’s crucial little book on denationalised money has long been available on the www as a free .pdf download, but I only just found out that Detlev Schlichter’s book is now available as a free-to-download .pdf file also. Blog and learn.
The idea that an economist is an expert even in Economics is a dubious one. I would like to see two control groups shadowing every team of ‘expert’ economists – one making random predictions, the other a group of astrologers. After five years we compare their predictions for accuracy.
– Samizdata commenter Rob
The logical end-point in the reach of government is either state ownership of all private property, which is communism, or state control over what people do with their property, which is fascism. With communism discredited, the world is moving inexorably towards the latter. Every business is regulated in some way or other, and economic freedom is being progressively restricted with ever-tightening regulations.
– Alasdair Macleod
Recently a friend who works for the BBC asked if I knew of any good general interest but topical stories coming up any time soon, and I said that when they finally finish London Gateway, the new container port now being constructed and even already slightly used, on the north bank of the Thames Estuary, that will be made a big fuss of.
She then told me about a series that the BBC World Service is doing about 50 Things That Made the Modern Economy. I said that the Container certainly should be one of these Things. She later determined that the Shipping Container does indeed feature in this series, and she sent me that link. Amazing what a difference an email with a link makes to your willingness to attend to something.
This piece about the Shipping Container lasted under ten minutes, and, although I had heard most of the story before, I liked it. So I then sampled a couple of the other Things, about which I knew less and nothing, namely: the Barcode, and the Haber-Bosch Process. The latter is for turning the nitrogen in the air into fertiliser.
The next Thing I listen to will be Concrete. I already know what concrete is, but I expect to learn a lot more, about it, and about what it did to and does for the world. Made life a lot easier for farmers, apparently. Which, to a townee like me, is one of those many things which is obvious, but only if someone makes me think about it.
Recommended. An economist and economic historian by the name of Tim Harford has done a number of these Thing broadcasts, including the ones about the Container and about the Barcode. He is already very well known, but not so well known to me. But, I can already tell you that he also is to be recommended, going only by how he talks about these Things.
LATER: See also this earlier posting here, about similar Things.
I wanted to believe that Hillary Clinton would lose the recent US presidential election, so when I started reading Scott Adams saying that she was indeed going to lose, to Trump, I kept on reading him. Like so many others, I like to read within my bubble, as well as outside it. That means I also now read Scott Adams on every other subject he deals with in his blog. I am now digging back into his archives for more wise and witty verbiage. I am surely not the only one doing this now.
Scott Adams has a girlfriend called Kristina Basham, who, it would appear, is working and working at becoming one of those people who is famous for being famous. This is one of those labels that most people seem to assume is an insult. But being famous is a skill and a job, like any other skill and job. Your basic skill is that you know how to attract attention, and you basic job is that you sell this ability and live with the adverse consequences of it as well as the benefits. Scott Adams describes very well the sort of work that goes into becoming one of these F4BF people, as I will call them from now on. Kristina Basham is not, you see, outstandingly good at anything in particular. She is just pretty good at a whole “stack” of things, which, when you combine them, are making her into someone F4BF.
I say: good for her.
The claim that people who are F4BF contribute nothing to the world is the latest iteration of that very old and very bad idea that there is a “real” economy, consisting of work that people are used to doing and which their ancestors even did, like farming and then after that factory working; and then there is the “unreal” economy, consisting of silly things that add nothing to the “real” economy, but instead just leach off it, like financial services (which actually make farming and industry massively more productive by telling farmers what to farm and industrialists what to industrialise), and more recently jobs like being F4BF. (Even being a factory worker was once upon a time denounced as being unreal.)
Being a celeb, and in particular being nothing but a celeb, an F4BF, which is to say being good at attracting attention to oneself but for no single and obvious reason, but still being good at it, is a vital part of the modern economy. Celebs, including F4BFs, enable attention to be diverted away from major economic investments, while the work of creating or building them is being done and needs not to be disturbed, in the secure knowledge that when attention is finally demanded, and you need to attract a lot of business very quickly or else a lot of money will be lost while the word spreads by mere unassisted word of mouth. For that grand opening of whatever it is that you have been quietly working on for however long it has been, you hire a bunch of celebs. Including maybe some of that particular sort of celeb who are F4BF, pure and distilled celebs who are nothing but celebs.