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As I keep saying jobs are a cost not a benefit. We do not want to go around the world – or even our own country – creating costs now, do we?
No, no, jobs really are a cost, they are not a benefit. Think on it. We have some amount of human labour available to us. So, if we use that labour to do this thing here then we cannot use it to do this other thing over there. The cost to us of using the labour to do this thing is therefore losing the opportunity to do that other thing over there.
Yes, I know, people like to be able to consume. For most of us that means having an income with which we can purchase our consumption. But even to us that job is a cost. The work we’ve got to do is the cost of gaining the income. And, obviously, a job is a cost to the employer – the production is what they desire, the job is a cost of gaining it.
It’s entirely true that renewables require more human labour than other forms of energy collection and or generation. But that means they make us *poorer*.
– Tim Worstall
Do people remember all those years back, at the time of the financial crash of 2008, about how so many wrote and spoke about dangers of an over-concentrated banking system, “too big to fail”, moral hazards of bailouts, poor risk management, etc? I do. I cannot count the articles, conferences, talks, books and videos about all this, and the lessons that must be learned.
Well, here we go:
There is, however, a bigger and simpler problem that financial-stability supervisors have been growing concerned about: The over-reliance of banks and markets on a limited number of third parties for things like cloud-computing services, software and risk-modelling tools. The UK, for example, found that 65% of British financial firms used the same four cloud providers. And earlier this year, the International Monetary Fund dedicated a chapter of its annual Financial Stability Report to cyber risks, noting that the world’s biggest systemically important banks were growing increasingly reliant on common information-technology providers. The IMF found a greater overlap in major banks’ use of the same IT products and services than was the case for insurers or asset managers.
The comment is by Paul J Davies, a writer for Bloomberg ($). He is writing about the implications of the Microsoft/Crowdstrike outage that slammed banks, airlines, healthcare providers and others last Friday and through the weekend.
Besides the level of “fragile” reliance on a few systems, is the fact that this saga, in my mind, makes it even more dangerous to proceed with things such as digital identities (an idea of Tony Blair), central bank digital currencies, and the rest of it. I think I need to re-read the Nassim Taleb book, Antifragile.
I wanted to reflect on how Mr Trump’s running mate – JD Vance (he came out of business and he worked in venture capital) – can nevertheless hold often anti-market views. (See his praise for the anti-trust stance of the Biden administration.) At best, Mr Vance seems to be a sort of “small business” champion with a dislike of bigness for bigness’s sake, conflating size with lack of competition. (Anyone who can understand the “Austrian” insight that competition is a dynamic process through time, and appreciate what Joseph Schumpeter called the creative destruction of capitalism, can see the flaw in this sort of prejudice.)
The problem is not Big Business per se. The problem is when businessmen lobby Congress or whoever for favours, such as for tariffs, exemptions from rules applied to others, tax breaks, subsidies, appointments of their people into government for leverage, cheap loans from banks, etc. Anti-trust is absurd and ripe for arbitrary assaults on property and freedom of contract because one can be guilty of “anti-competitive” conduct regardless of whether one charges higher prices than a rival, the same price or a lower one. Without an objective measure, it is a wrecking ball. (Insider dealing suffers from the same problem.)
That’s the sort of issue where Mr Vance needs to focus his anger. But has he? Has he made these points? Has he, for example, pointed out that central bank QE and the holding of interest below the natural rate creates “zombie” corporations, reduces investment into productive enterprise and reduces productivity, and hence wage growth ? Has he understood, and denounced, how finagling interest rates by central banks and politicians has distorted the capital structure of the West, and done so down the centuries, with ruinous consequences? Does he realise that all this monetary madness calcifies business, protects big firms, encourages financial engineering over investment, etc?
If Mr Vance can answer my questions about QE, for instance, with a “yes”, I would like to see evidence of it. (Commenters: please do so!) Because there is a long and honourable tradition of radical politicians – and I mean real radicals, not just people who claim they are – doing this. In the 19th century, in the UK, liberals and progressive political activists such as Richard Cobden and John Bright denounced artificially cheap money, as well as mercantilism. They saw those who want to clip the coinage, and impose tariffs, as enemies of the Common Man. They supported gold-backed currencies. That’s radicalism.
Mr Vance could, if he wanted, reacquaint America with that tradition. He could point out how tariffs favour incumbent firms and hurt small and medium sized firms with higher costs. He could point to a large and corrupting lobbying system that calls for all this stuff.
To be fair to the Trump campaign, it appears that Trump is quite sound – if you believe Marc Andreesen and Ben Horowitz (both former Democrat voters) – who say that Trump is much saner and better on encouraging tech startups and the like than the Biden administration has been.
Ivory Coast and Ghana provide the bulk of the world’s cocoa crop. They’re getting richer, substantially so. Cocoa is a crop usually farmed by an old bloke and his machete, the plants spread through a few acres of forest. It’s labour intensive – which means that as the countries get richer they hit that servants/peasant problem. If it’s possible to make much more than being a cocoa farmer then why would people be cocoa farmers?
The answer, obviously, is as with everything else – mechanise it. Ah, but no one’s really worked out how to grow cocoa at scale, in the sort of plantations that are suitable for that sort of large scale mechanisation. As far as technology is concerned it’s still, really, a peasant crop. A peasant crop in places rapidly getting much richer.
In the long run choccies are going to get very much more expensive unless someone does work out that mechanised farming method. For the joyous and lovely reason that people are getting too rich to want to live like peasants any more.
– Tim Worstall
“It is true that taxes and prices have risen. But this did not happen in a vacuum. For much of 2020 and a chunk of 2021, we paid people to stay home, and printed money with wild abandon. What the hell did we think would be the consequences?”
– Doug Hannan.
“When sweeping, idealistic dreams trickle down into sales and marketing channels, AI’s potential uses become unclear. Framing AI as a general-purpose Swiss Army knife for productivity inevitably leads to paralysis for its end users: Where do you even start with a technology that can do everything?”
– Parmy Olsen, Bloomberg ($)
Along with others, Olsen is freaked out by the skyrocketing ascent of chip-maker Nvidia’s stock price.
Productivity isn’t flat today in the slightest. It’s just turning up in the consumer surplus, not GDP. As with my favourite example, WhatsApp. That is in the economic statistics as a decline in productivity (no, really). It’s also giving 2 billion people free telecoms. As another (non-NL so far at least) economist, Hal Varian puts it, GDP doesn’t deal well with free.
– Tim Worstall
Lord (David) Frost is in suitably scornful form this morning in the Daily Telegraph (£). He takes aim at the idea, set out in yesterday’s Labour manifesto, that economic growth can be lifted from its torpor by a mass of councils, committees, agencies and the like, all directed from Whitehall but working, somehow or other, in “partnership” with private sector firms. As he notes, Starmer and the rest of them have learned all the wrong lessons from lockdowns, and in fact they liked the lockdowns precisely because of the ability to order the public around, to mark their movements and somehow command innovations (vaccines) by clapping one’s hands together. The headline of the article is excellent:
Lockdown is the inspiration behind Labour’s ‘plan’ for growth.
Excerpt:
The truth is, of course, that don’t get growth just by saying that you want it, by spending money, or by getting bureaucrats to draw up plans. You get growth by allowing people and companies to invest, spend and invent, as they see fit; by letting them keep what they have earned; and, as far as possible, by staying out of the way.
I cannot resist parallels with where we were in 1964. The Conservatives, led at the time by Alec Douglas-Home (a much underestimated politician and a sharply intelligent man), appeared exhausted and “out of touch”. There was this whole thing about the “grass moors” – pictures of toffs shooting game birds on Scottish estates, and speaking in absurd public school accents. The times they were a changin’: the Beatles were exploding, George Best was transforming the world of football, Sean Connery was on the big screen doing battle against Spectre, and Peter Cook and Dudley Moore were making us laugh on TV; consumer goods were more accessible in our shops, and Labour sought to go for the “white heat of the technological revolution”. A lot of this was flim-flam, although some wasn’t. Harold Wilson, who smoked a pipe in public to appear more “sound”, apparently, did a lot of arguably good liberal things: censorship of literature more or less ended; the death penalty ended; homosexuality was decriminalised, divorce laws eased. Social conservatives may jib at this, but there was an aspect of genuine liberalism on parts of the Left that have vanished now in these “cancel culture” times. The downsides were still enormous: ugly buildings, the launch of the destruction of grammar schools and encouragement of egalitarian (and mostly bad) ideas in education. (This Dominic Sandbrook article gives a flavour.)
We know how things ended. In 1967, there was a serious run on the pound in the foreign exchange markets (the UK was still part of the Bretton Woods system, which was ultimately underpinned by the dollar and the $ was still linked, however tenuously, to gold); attempts to rein in trade unions failed; spending on welfare and health rose. Horrid tower blocks were built to replace older housing, to the questionable benefit of the country. There was a “Brain Drain” – sky-high taxes on the “rich” meant that anyone of note in music, film, entertainment, commerce and industry lived abroad.
By 1970 the wheels had come off. Wilson’s government appeared out of ideas, and its enthusiasm for central planning and control appeared as discredited as the Soviet Union. Throw in the turmoil abroad (Vietnam, end of Bretton Woods, the OPEC oil shock, racial and social mayhem in the US,) and things moved fast. Unfortunately, when the Tories were elected on a slim majority in 1970, a promise of radical reform under the horrible Edward Heath did not endure, and by 1974 the country was in deep trouble: strikes, power cuts, civil disorder, the nightmare of Northern Ireland. It wasn’t until 1979, with the election of Margaret Thatcher’s Conservatives, that matters improved. And for several years it was turbulent, and not a sure thing.
Consider the parallels, even beyond the confines of the Labour manifesto: We have seen a relentless assault on “the rich”; and taxes are rising on them, and there is in the background the threat of a wealth tax, encouraging people who can to get out. The Labour Party wants to impose value added tax on private schools, consolidating the power of unions who hate any form of choice in education. There’s likely to be a lot of house building (something I broadly support), but one has to ask about the likely quality and appearance of it. And to go back to Lord Frost’s point, there is an inability, a sort of complete mental block, to think of bottom-up solutions by individuals doing their own thing to anything. Every problem, in the Labour mind, starts with what government can do about it. I am reminded of the theme of that excellent book, “Seeing Like A State, How Certain Schemes to Improve the Human Condition Have Failed”, by James C Scott. I doubt that Keir Starmer or his likely future Chancellor and finance minister, Rachel Reeves, have read it.
The groundwork for this memory-holing of lessons from the past has been in evidence for some time. I think the 2008 financial crisis, and the way that a poisonous narrative was allowed to build around what caused it (evil bankers, deregulation, etc, when the causes were mostly about government), carries a lot of the blame for this.
There’s also just a dreadful complacency among those who just assumed that arguments for free enterprise had been won and we can focus more on gender pronouns or so on. (I have seen plenty of comments like this from “social conservatives” who have even told me, at times, that public debt “does not matter” because immigration is so much more important.) What has happened is that the classical liberalism tradition has gone soft. I was struck by how, for example, you can go into a bookshop such as Waterstones in the UK and almost every tome on politics and economics will be banging on about the alleged evils of neo-liberalism and how such ideas rule the world. If only. (A book, Free Lunch Thinking, by Tom Bergin of Reuters, is one of the more intelligent ones, but it is full of questionable conclusions, such as its attacks on the idea that incentives matter, and has been nicely and politely taken apart by Kristian Niemietz of the IEA.)
It is worth recounting all this to understand that while history never exactly repeats itself, it does rhyme. The 60s aren’t coming back as far as music, fashion and films are concerned (shame), but we are likely to get some of the other stuff.
The Wall Street Journal ($) has been running articles looking at the silicon chip industry, and the attempts by countries such as the US to try and protect and stimulate production of high-end chips. I can strongly recommend Chip Wars by Chris Miller for an overview of the rise of this extraordinary industry, and the web of supply chains that underpin it.
Here’s the newspaper’s latest feature on the topic:
Two years into a nearly $53 billion government effort to shore up the U.S. chip industry, the [US] program’s impact is becoming clearer: Big companies making advanced chips are getting a boost, but there are limits to what the money can do. The Chips Act, passed in 2022 to jump-start domestic semiconductor production, is supposed to supercharge chip making in the U.S. But even in its early stages, it is being challenged by fast-growing chip industries in competing countries, political complexity regarding the allotments at home and the sheer expense of manufacturing chips.
The lion’s share of the allotments have been slated for Intel and other large chip makers that plan to make advanced chips in the U.S., while some companies that are important in other parts of the chip-making supply chain have missed out. Meanwhile, other countries have amped up spending to keep competitive.
The government received hundreds of applications for the grants from companies eager for funding.
No kidding. When lots of public money is hosed around, firms will try and get some of it.
The biggest chunks of money went to Intel, which got up to $8.5 billion of grants for several projects, and to Taiwan Semiconductor Manufacturing Co., Samsung Electronics and Micron Technology, each of which were allotted more than $6 billion for their projects.
Another way of describing it is corporate welfare.
Industry executives have largely been pleased with the rollout of the program, even as labor disputes, higher costs and extended environmental reviews are slowing work compared with some other countries.
I am sure they are.
Some investors are worried about the amount of money being spent on new construction. Elliott Investment Management, an activist investor, took a $2.5 billion stake in Texas Instruments and wrote a letter last month to its board of directors urging slower spending on manufacturing growth to boost cash flows. TI is expected to receive grants under the Chips Act.
There are dangers of major misallocation of capital when politicians drive anything.
The impact of the program is also limited by the sheer cost of chip plants. A single advanced chip fab can cost more than $20 billion, and the planned U.S. facilities won’t be operating until later this decade. Those realities mean that even a historic $39 billion grant program can’t itself tip the global share significantly in the U.S.’s favor.
This is an expensive business.
The tax credit expires in 2026, and industry lobbyists are already preparing to push for an extension.
I am sure they are. The lobbying industry gets another cause to chase.
The Observer is editorially independent from the Guardian, and sometimes it demonstrates that fact to good effect. Today’s edition included this article: “‘A catastrophe’: Greenpeace blocks planting of ‘lifesaving’ Golden Rice”.
Scientists have warned that a court decision to block the growing of the genetically modified (GM) crop golden rice in the Philippines could have catastrophic consequences. Tens of thousands of children could die in the wake of the ruling, they argue.
The Philippines had become the first country – in 2021 – to approve the commercial cultivation of golden rice, which was developed to combat vitamin-A deficiency, a major cause of disability and death among children in many parts of the world.
But campaigns by Greenpeace and local farmers last month persuaded the country’s court of appeal to overturn that approval and to revoke this. The groups had argued that golden rice had not been shown to be safe and the claim was backed by the court, a decision that was hailed as “a monumental win” by Greenpeace.
The only way the jobs can go is if the machines are now doing the work formerly done by humans. Which means that we gain the same output without the human labour input. That’s an increase in the productivity of human labour – the main driver of increases in human wealth.
What fucking value destruction?
– Tim Worstall
I was actually there when Boris (Yeltsin) freed food prices. Replacing that planned, understood, thing with the complexity – and the impossibility of understanding its complexity – of the market is exactly what filled the shops with food.
Now do you see the point here? The dipshittiness of the basic demand being made about AI? The lawyer is saying that unless we already understand it all we shouldn’t be using it. But the entire point of the use of these complex not-understood things is that we don’t, in fact, know how it all works. Therefore we use this miracle thing to work it out for us.
To say that we can’t use AI until we know what the result will be is the same as saying we’ve got to use economic planning because we don’t know what the market outcome will be. We’ve even that long experiment – the 20th Century – to tell us how that worked out. Those who didn’t use the not-understood complexity remained shit poor.
– Tim Worstall
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Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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