We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.
Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
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My friend Patrick Crozier often writes about the harmful impact of planning restrictions on the housing market. If he has not already read this posting by Virginia Postrel, and this article of hers that she links to, he should.
A key paragraph in the article, which she recycles at her blog if only to ensure that it may continue to be read after the article as a whole has disappeared behind some Old Media Wall, goes thus:
Dallas and Los Angeles represent two distinct models for successful American cities, which both reflect and reinforce different cultural and political attitudes. One model fosters a family-oriented, middle-class lifestyle – the proverbial home-centered “balanced life.” The other rewards highly productive, work-driven people with a yen for stimulating public activities, for arts venues, world-class universities, luxury shopping, restaurants that aren’t kid-friendly. One makes room for a wide range of incomes, offering most working people a comfortable life. The other, over time, becomes an enclave for the rich. Since day-to-day experience shapes people’s sense of what is typical and normal, these differences in turn lead to contrasting perceptions of economic and social reality. It is easy to believe the middle class is vanishing when you live in Los Angeles, much harder in Dallas. These differences also reinforce different norms and values – different ideas of what it means to live a good life. Real estate may be as important as religion in explaining the infamous gap between red and blue states.
And here is the concluding paragraph of the article:
The unintended consequence of these land-use policies is that Americans are sorting themselves geographically by income and lifestyle – not across neighborhoods, as they used to, but across regions. People are more likely to live surrounded by others like themselves, creating a more-polarized cultural map. In the superstar cities, where opinion leaders congregate, the perception is growing that the country no longer has a place for middle-class life. Yet the same urban sophisticates who fret that you can’t live decently on less than $100,000 a year often argue vociferously that increasing density will degrade their quality of life. They may be right – but, like any other luxury good, that quality commands a high price.
My only tentative disagreement would be to ask: unintended? If you are inclined to read this entire article, do it soon.
The more I think about the Green Belt that surrounds London, the more I find myself loathing it. I agree that greenery is nice to live near, very nice (I live quite near to St James Park, London SW1, and very fine it is too. It is what you might call the Buckingham Palace front garden, which maybe it once was for real, approximately speaking). But considering how huge the Green Belt is, hardly anyone lives in or near it. That is the whole idea. Judging by what the Green Belt looks like from the train when I go to visit my mum, who lives just outside it, it consists mostly of boring fields that only farmers have anything to do with or would want to. What would be nice would be lots of big parks, like Richmond Park or Wimbledon Common, surrounded by more houses.
If that makes daily commuting into London even more unpleasant than it is now, well, just put up the train and road use prices at the point of use. This would encourage people who now commute either to work nearer to home, or even to stay at home and do (more of) their work from there (maybe they could take a laptop into a nearby park). Plus it would encourage more and better railways and roads. The economy would adjust happily, if only all the economic signals were responded to rather than merely the signals that say that an ever growing number of people, from all over the world, are chasing a heavily restricted number of London houses.
Pondering some of the recent stories about changes to UK inheritance taxes (the government’s ‘cut’ is in fact less impressive than it first appears), it occurs to me that there is one fairly respectable argument for worrying about huge inheritances, namely, that if people who work incredibly hard watch as other folk sail into positions of power and business wealth through the pure luck of having a rich family inheritance rather than through merit, it can be demoralising and encourage resentment against the broader capitalist system. Hence, so the argument goes, even though inheriting wealth per se is not wrong – it is the right of X to transfer legitimately acquired property to whomever he or she wants, period – it is sensible to foster an economic environment in which people feel they get a fair shake at what life has to offer.
I once was quite attracted by this idea of taxing inheritance to encourage some sort of ‘level playing field’, but I am no longer so sure. For a start, if an economy is expanding rapidly, it is hard to see how the presence of rich kids really demoralises less fortunate people. The economic process is not a zero sum game. Arguably, a sense of anger (“I’ll show those rich bastards”) may even spur the latter group to work incredibly hard to overtake the former. Rich kids may find they have to work harder, too, to impress people in certain ways who resent their wealth, and so on (I have seen this in action).
If a society is a closed one and the state controls most, if not all, of the key parts of an economy, then the existence of a small but influential case of rich people able to pass on their wealth without hindrance might also be a problem, but the solution to that is not to tax inheritance, but shrink the state.
A final point worth repeating over and over is the old example provided by the late Robert Nozick, the Harvard philosopher. He famously trashed egalitarian attacks on inherited wealth by rejecting the model that egalitarians use of society as a justification for their views. He said, if memory serves, that egalitarians tend to view life as a closed circuit, like an athletics track, and that if a person inherits a fortune, it is like an athlete starting a race 10 yards ahead of his fellows. But there is no fixed end to which people in society are racing, as they are in a 100m sprint. Instead, society is simply the short-hand term we use to describe the network of relationships between people exchanging things with each other to get what they want. To say that if I inherit my father’s dashing good looks or wealth means I have an “unfair” advantage over X or Y is meaningless in the context of an open society.
There are many practical, utilitarian reasons to object to inheritance tax (although other taxes are arguably even worse). But the moral case against it also needs to be made and the collectivist, zero-sum assumptions on which anti-inheritance views are made also need to be challenged for the errors they are. We cannot expect that job to be done by George Osborne.
(Update: over at the left-wing blog Crooked Timber, a contributor argues that the focus for inheritance tax, which is regarded as a good thing, should be on the beneficiaries, not the bequesters. But of course; if you are an egalitarian, it is natural to want to push the focus away from the right of people to dispose of their property to those that receive it. But the comment makes no reference whatever to why inequality that may arise from inheritance is in and of itself a bad thing. Such inequality is just assumed to be a bad thing, period. No actual argument, from first principles, is given as to why).
As Brian pointed out recently, when the Tories proposed raising the threshold at which Britons pay inheritance tax on an estate to £1m from the current £300,000, it would be denounced by the usual suspects as grossly unjust, etc, and once the initial furore had died down, the Labour government would copy it, up to a point.
So it has.
This proves a general sort of point that David Cameron, the Tory leader, should now pursue with all due vigour (although I doubt many of us crusty cynics will be convinced that Cameron has suddenly turned into Nigel Lawson, not that Cameron gives a damn about what a blogger like me thinks). It will have proved a general point that arguing for tax cuts, even supposedly middle class ones, is smart election strategy and can force the government of the day to respond. Frankly, if a politician like the Chancellor, Alastair Darling, acts cynically but it means people do not have to go through contortions to avoid paying some tax, that is progress.The government’s financial plans come with costs: the government intends to get rid of some old reliefs for capital gains, which could hit private equity, but at least it has simplified the tax code somewhat, which has become one of the longest and most complex in the western world.
Real progress, of course, will come when inheritance tax, along with other taxes, are reduced or in some cases, hopefully eliminated. And the situation will really improve when the next stage comes along – a general shrinkage of the state and the vast payroll of people living on public funds. Well, we can all dream, can we not?
This reviewer plainly does not care much for Naomi Klein, scourge of the supposed evils of global capitalism. I plodded through some of her writings once just to see what the fuss was about and the economic illiteracy of this woman surprised even a jaundiced observer like me. She has achieved the rare feat of making the late JK Galbraith look like a great sage by comparison, which is quite a feat, given that many of his predictions were wrong, although he was a witty writer at times, which I suspect explains a lot of his appeal. And yet it is all such a shame: I think we free marketeers need to be challenged by high-class criticisms in order to sharpen our own defence of the market order; the problem is that if the anti-capitalist types out there become self-parodies, we can fall into a sense of false security. It never fails to surprise me just how bad a lot of anti-market writing often is.
On the issue of anti-capitalism, this old gem by Ludwig von Mises is a must-read, as fresh now as when he wrote it decades ago.
The decision of the British government to rescue Northern Rock, the mortgage lender, with billions of pounds of taxpayer’s money, represents a terrible long-term blunder, in my view. It may also put the UK afoul of EU law, for those that care about such matters. Of course one feels very sorry for the people who have savings with NR and I suppose many of them are mightily relieved at the turn of events. I am sure I would be relieved if I were in their position.
But hard cases make bad law, and bad policy. Consider what has happened: a company gets itself into a pickle because its funding policies are up-ended by a sudden rise in short-term interbank borrowing costs; fears grow that the firm cannot make good all its commitments and a bank run occurs. Before the days when financial institutions of a certain size were considered too large to be allowed to fail, the collapse, however tragic, of Northern Rock would have been seen as a necessary if very nasty reminder that capitalism has its risks.
Banks and other institutions that lend money must not lend to people without being sure of the latter’s credit worthiness. But that caution has been thrown to the winds in recent years: in the US and Britain, for example, borrowing covenants have been relaxed, and pretty much any sentient lifeform has been able to get a mortgage. Some financial institutions are to blame for their plight although in mitigation, the price signals that are the essential feature of markets have been distorted by a long stretch of cheap money. The ultimate culprits, as I said the other day, are the central banks and their historically low interest rates. With so much cheap liquidity, the sort of returns investors made on safe investments were peanuts and so they took greater risks for often only a slightly higher reward. We are now moving to a position where risk is more realistically priced. The Northern Rock bailout undermines that move.
The rescue of Northern Rock also shows that the supposed success by Margaret Thatcher and even John Major in rolling back socialism is itself an exaggeration. It proves that if a company is big enough, it can call on the public purse. Northern Rock, based in Labour Party heartland of the north-east, has been effectively nationalised by the government, and inevitably, the clamour will grow for more and arguably more deserving groups of people to be bailed out. I can think, for example, of the hundreds of thousands of people who face retirement without a decent pension because Gordon Brown, when he was Chancellor, helped to shaft private sector pensions by changes to how equity dividends are taxed. They are arguably far more deserving of some form of recompense.
Of course, if the Tories had any moral or political backbone – and they most certainly do not – they would have denounced this state of affairs, rather than take the easy way out of playing to the gallery by supporting the tax-funded bailout of Northern Rock. Back in the mid-1990s, when Barings went down due to dodgy trades in the derivatives market, the collapse was seen as a harsh but necessary lesson about the realities of risk. For a while, Barings served as a useful warning, far more useful than any group of regulations. With the rescue of Northern Rock, careless financiers will now regard the state as an easy touch.
Neil Cavuto (of Fox news) to Alan Greenspan.
“Did you keep interest rates too low for too long, creating a bubble?”
Mr Greenspan to Mr Cavuto.
“Collapse of communism in Eastern Europe… [blah, blah, blah]… the Third World… [blah, blah, blah]… the rise of investment in China…”
Draw your own conclusions.
This is a pretty good yarn explaining to the layperson how exactly we moved from a period when the financial markets only ever seemed to go up to the time, now, when there are long queues of anxious customers trying to pull their money out of mortgage lending and savings firm, Northern Rock. Hedge funds have lost money. Weird-sounding entities called ‘SIV-lites’ have lost cash (the absurd jargon of financial markets never fails to amaze me). I do not share the view of some Jeremiads that this saga will bring about a recession – although I do not discount that possibility – but the pace of the UK economy is bound to slow down. Suddenly, this present government is going to find it a lot harder to pay for all those new public sector sinecures it has created over the past 10 years – possibly as many as a million public sector jobs. Slower growth will cut into revenues.
The Northern Rock saga has jolted financial markets so much that the US equity market today fell because of the situation. Normally, the UK stock market takes its lead from the US, not the other way around. By coinidence, meanwhile, Alan Greenspan, the former chairman of the US Federal Reserve, has been plugging his memoirs and airing his views about the current problems. Like a lot of people, I take a less than reverential view of Greenspan, although I can see his many fine qualities too: he is a good economist, pretty sound on markets as such folk go, but he abandoned his old, gold-bug principles a long time ago and was a pretty “seat-of-the-pants” sort of Fed head, making up economic doctrine almost, it seemed, on the hoof. It is a bit rich, frankly, for Greenspan to bash Bush for the tax cuts (one of the few good things that Dubya did as President, actually). Greenspan operated a relatively loose interest rate regime and this fuelled the lending practices that have come back to haunt us, especially the whole sub-prime debt Snafu. Cheap money that is detached from economic reality begets trouble. As a man who once learned his economics in the circles of Ayn Rand and Ludwig von Mises, it is a shame that even he could not understand this, or if he did, act upon it.
I have said it before but I repeat it here: it is high time that the cult of the detached, Olympian central banker setting interest rates for whole land masses was ended. Here is the classic statement of why central banks with monopoly rights of currency issuance keep coming a cropper.
London is the most expensive place to eat out in the world, even more pricey than Tokyo (a city I really want to visit). Not very surprising, I guess. The sheer financial vibrancy of London fuels this, although it may lose some oomph if the problems in the global markets lead to some job cuts in the investment banking industry.
The key thing I have learned is to be bloody careful about the wine. I find that even in a pricey restaurant, you can get away without paying a fortune so long as you go very easy on the booze. But as soon as you buy anything other than the cheapest plonk in the list, you might as well call in the receivers and sell the house. For this reason I rarely eat out in expensive places, unless it is a special occasion, or eat at my magnificent Tandoori restaurant in deepest Pimlico, which is right next door to my flat. Now that’s luxury for you.
Recommendation: try this place out for a special night out. Great staff.
The other day I encountered this argument, which I failed properly to swat away and as a result, got rather rude to my interlocutor and he went off in a huff (sorry about that mate). What he said that made me go red was this:
“You libertarians keep banging on about the terrors of regulation. Yet you also slag off massive lawsuits and things like that. But if you want to get rid of huge payouts for things like people suing for damages, you need regulations. So why are you so hostile to them?”
As I pointed out, this is what is called a straw man argument.. Such “arguments” hold up a false, or in some cases deliberately false and weak, version of a point of view that a person wants to knock down easily (hence the “straw” bit). So let us fisk it.
First, I do not know any liberals or libertarians who argue that regulations are and always are a bad thing. Private sector bodies and voluntary associations of all kinds have them. A privately owned hospital, for instance, would regulate the behaviours of people who entered the premises. Why? Because that hospital would not want its reputation and bank account to be wrecked by outbreaks of disease, which lead to nasty insurance payouts. So it is in the self interest of said institutions to operate regulations, and more important perhaps, to be seen to do so. Another case is the London Stock Exchange. Long before modern financial regulators like the Financial Services Authority came along, the LSE was founded (back in the 18th Century, I think) and it had rules, albeit not always formal ones, but rules nonetheless (“my word is my bond”, etc). Trust is the key. And if you do not have trust, and have ways of enforcing said, then networks of commercial or other transactions do not work so well. So let us dispose of the canard that classical liberals are agin regulations. They are not. What we are against is one-size-fits-all regulations imposed heedlessly by the state. This is the crucial thing. Regulations, to be useful, need to be tried and tested, and if need be, discarded. State regulations tend not to be like that, but rather resemble clumps of ivy climbing up the side of a tree. They are much harder to reverse.
Okay, so now we come to the idea that libertarians hate expensive lawsuits. I suppose it is true that we hate frivolous, massively costly lawsuits, by definition (and who does not, except lawyers?). But sometimes you need to have lawsuits because you will not always have perfect knowledge of the kind of problems that can arise. Take the example of the hospital again – its managers may not know about new diseases that can be transported into the building in unexpected ways. A lawsuit following a disaster may be the trigger for a new rule. In this sense, lawsuits, although unpleasant for those on the receiving end of them, act as a sort of discovery process about what sort of problems exist. Lawyers have their uses.
In other words, this is quite a complicated argument. I just will not make the same mistake of trying to explain it after two beers and a 13-hour day at the office.
I am glad to see that the current moral panic about Britons sliding into a Hogarthian nightmare of drunken idiocy has not put off these guys from selling sparkling wine – or champagne, maybe – for £5 a bottle. I am not sure whether it is going to taste as good as Krug, mind. And of course, with many so-called luxury goods, the business model gets ruined if the prices are cut so massively that the exclusivity is lost, and hence the cachet of buying X or Y in the first place. Would Ferraris, for example, be quite the same if they were as cheap as Fords?
Even so, fair play to the businesses that bring us cheap goods. Globalisation – terrible, isn’t it?
There could be an interesting storm brewing when you see things like this…
Gold has raced to a 16-month high of $700 an ounce as investors seek to shelter their cash after stock markets ended the week sharply lower. The yellow metal has clawed back around $30 this week, raising hopes it could revisit last year’s highs of around $730 an ounce. Although gold is traditionally strong at this time of year, the rout in credit markets is fuelling further appetite for the safest investments.
and this…
A sharp drop in foreign holdings of US Treasury bonds over the last five weeks has raised concerns that China is quietly withdrawing its funds from the United States, leaving the dollar increasingly vulnerable.
I am trying to join the dots but instead of a bull or a bear, the outline looks a bit like a hippopotamus. Not sure what to make of that.
Tim Worstall has a bit of fun with poor old George Monbiot, who frets about the origins of all that terribly nasty “neo-liberal” (ie, classical liberal) thinking that dared to suggest an alternative to Man’s future in a great socialist project.
Well, I have been to a few events hosted by think tanks like the Institute of Economic Affairs, have been a member of the Libertarian Alliance for 22 years (!) and have been even known to correspond with likeminded people in foreign countries. The sheer horror of it, Georgie!
Seriously, articles such as Monbiot’s suggest to me that the “neo-liberals” have been winning at least some debates, or at least getting under the collars of collectivists of various types. That has to be a good thing.
For a grown-up analysis of the revival of classical liberal ideas in the West, Brian Doherty’s book is a great read. It mainly focuses on the US, however.
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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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