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.
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This seems like a good idea
The Financial Services Authority (FSA) is to hold a six-week exercise to test the resilience of the UK’s financial institutions to an avian flu pandemic.
Starting on 13 October, some 60 banks, insurance firms and other financial businesses will take part.
The exercise will look at a number of factors including how firms could cope with a greatly reduced workforce
Yes, I know that we free market purists might argue as to why we need a big regulator like Britain’s FSA to set this up, but even in the absence of such a body, smart businesses would be looking to stress-test their systems against a potential serious problem like avian flu. And it is serious. Naysayers may jest about how much effort was expended on the Y2K technology issue (remember that?) but I am encouraged that these sorts of issues are taken seriously. The health of the London-centred financial system is critical, not just to the British economy, but to the wider trading system as well.
Tyler Cowen, hardly a scaremonger, has thoughts about possible preparations that should be taken.
There is a military coup in Thailand, a crazed leader of Iran denying the Holocaust and prattling about the return of the “12 Iman”; a Venezuelan demogague brandishes the work of terrorist sympathiser Noam Chomsky; there are riots in the streets of Hungary, a major hedge fund loses billions in the gas market.
What do the world’s economic markets do in response to all this? Well, as historian Niall Ferguson notes, they do remarkably little:
The price of crude oil for November delivery fell 5 per cent last week, even as Messrs Ahmadinejad and Chávez were holding their rant-fest. On news of the coup in Bangkok, the Thai currency declined by little more than 1 per cent against the dollar – nothing compared with its spectacular gyrations during the Asian crisis of 1997. Investors in the Hungarian stock market are not having a great year, it’s true, but recent political events have barely registered. If you invested in Budapest two years ago, you have still nearly doubled your money.
To see just how far politics and economics have parted ways, just consider which of the world’s stock markets have done best so far this year. In pole position is Morocco (up 58 per cent in dollar terms since January 1). Next is none other than Mr Chávez’s Venezuela, up 49 per cent. In third place is Indonesia, where three Christian men were executed on Friday for their part in sectarian violence, sparking riots (34 per cent). Russia, where it is bankers who get the bullet, is not far behind on 32 per cent.
He goes on to argue:
investors are continuing to mistake liquidity for security. Despite the much-trumpeted tightening of interest rates by the world’s principal central banks, the reality is that monetary expansion has barely slowed. In Britain, for example, the broad money measure M4 grew at an annual rate of 13 per cent in July, a remarkable figure. Money may be dearer, but it is still amazingly plentiful. That seems to be encouraging a rather cavalier approach to risk assessment.
So it would seem.
Mr H. Benn (the ‘Overseas Development’ minister) has announced that the British government will withhold £50 million (US$ 94 million) of taxpayers money that it was to pay to the World Bank to be lent out to ‘Third World’ governments.
Mr Benn said this was protest against the World Bank’s policy of demanding free trade and privatization in return for loans. Actually the World Bank does not do that very much any more. These days it normally just demands that a loan (for example) for education actually be spent on education – rather than go in corruption.
However, I still think the government was right to withhold the money (and not because I am against free trade or privatization – or think that the same economic principles can produce good results in one country and bad results in another, as a weird editorial in the Daily Telegraph claimed), but because I do not believe that taxpayers money should be taken by the government and given to the World Bank.
The World Bank should not exist (and nor should the IMF). If ‘Third World’ governments want state education (or some other folly) they should pay for it themselves – as they will have to after the loan money runs out anyway. All the loan achieves is to give them a debt to pay back on top of the future state education (or whatever) bill.
The senior Russian central bank official who was shot dead this week was a prominent campaigner against money-laundering. No matter what one thinks of some of the more oppressive laws against money transfers – as a libertarian, I find a lot of such laws counter-productive and intrusive of privacy – there is no doubt that Russia has a terrible reputation for financial skulduggery. By going against financial hoodlums, it sadly appears this guy signed his death warrant.
Funnily enough, this story does not appear to have caused much of a stir outside the business sections and some of the foreign bits of the press. I find that a bit odd, if not chilling. A senior central bank official gets murdered. Imagine the reaction if a top official working for the Bank of England or the Fed got killed.
Russia has a long, long way to go before it becomes a place in which civilised people will want to do business.
This by George Reisman, economist and free marketeer:
The New York Times reports that the European Commission has “ordered Microsoft to disclose secret code in Windows XP needed by rivals to allow them to write programs that work properly with Windows. And it required the company to introduce a second version of Windows XP with its audio and video player removed.”
The European Commission is also reported to be drafting a ruling that will require the world tennis champion Roger Federer to share the secrets of his play with rivals, to enable them, for example, to better integrate their returns with his serves.
In still another development, the European Commission is reported to be contemplating barring the sale of automobiles and other motor vehicles equipped with radios, CD players, or video players. The ruling is held to be necessary to preserve the separate markets of the suppliers of these devices and not allow them to be monopolized by automakers.
Here is more about anti-trust pursuit of Microsoft by the European Union, in a slightly less irreverent vein.
As did many many countries, Australia prior to the 1980s had a state owned telecommunications monopoly. This company, part of the Post Office until 1976, after that named Telecom Australia and now named Telstra Corporation, charged too much, took several months to connect new telephone lines, and was generally ghastly and bureaucratic. As was also common in those days, the management of this organisation also had a rather grandiose sense of its own importance and its great civilizing and statist mission to bring telecommunications to all of the people of Australia, wherever they might be. Australia’s capital city of Canberra is a fair way inland, a long way from anything else of significance, and is full of large edifices built with taxpayers’ money. In the 1970s, Telecom decided that it needed an edifice of its own in the capital city, and Telecom Tower was built on Black Mountain (actually a not terribly large hill) overlooking Canberra.
 This was ostensibly a communications tower with a viewing gallery (and revolving restaurant) for admiring the view as well, but was actually a large bureaucratic organisation building a monument to its own Ozymandius like belief that it was an organisation of great permanence and importance. I last visited the tower about a decade ago, and even then it seemed a remnant from another age. There were signs talking about when and where it had been built and about the significance of telecommunications, diagrams comparing it to other structures around the world, a plaque stating it was a member of some global organisation of towers, pictures of engineers shaking hands at the groundbreaking, pictures of politicians declaring the tower open, and an extraordinary lack of humour of any kind. The word that the friend I visited it with used to describe it was ‘Soviet’, and it was hard to disagree.
Which was why it was interesting to visit another television tower a couple of weeks ago, the tower in Tallinn in Estonia. This can be seen in the distance from many parts of the city, and of course, rather than the TV tower in Australia that merely seemed Soviet, this tower actually was Soviet, so I had to see it. I knew just looking at it from a distance that this had been built as much as a symbol of Soviet domination and power as for actual telecommunications purposes, and that one way that this would be asserted would be through a viewing gallery and restaurant here, also. As I often do I was carrying a Lonely Planet guidebook. As is expected in such a guidebook, the book mentioned the TV tower by sneering at it, suggesting that the writers and readers of such a book would be much too good and much too authentic travellers to go up something as touristy as a viewing gallery in a TV tower, but we none the less have a duty to mention it in the guidebook.
 So, I caught a bus to the TV tower. When I got there I found it to be rather run down. There was an attendant at the gate collecting money, but the lift lobby was deserted and I had to push the button to be taken up myself. However, in the lower gallery were the expected signs explaining how “Expert engineers from the Moscow design bureau” had designed the tower, pictures of workers shaking hands at the groundbreaking, pompous looking bureaucrats strutting around at an opening, diagrams comparing the tower to others elsewhere, and that kind of eerily familiar thing.
 But there was something else, of course. Something much more historically interesting. → Continue reading: On telecommunications, tanks, Soviet housing estates in Estonia, and ethnically complicated shipping containers
The Cato Institute’s invaluable index of liberty, compiled along with another free-market think tank, the Fraser Institute, says that liberty, as measured across a variety of fronts, is advancing. It uses a sort of numeric to calculate the overall impact of government rules, and puts Hong Kong at the top, with Ireland and Britain tied at sixth place:
Nations that have made substantial gains in economic freedom since 1985 are Hungary, Iceland, El Salvador, Zambia, Poland, Bolivia, Israel, Ghana, Uganda, Peru, and Nicaragua. Nations that have registered significant losses in economic freedom since 1985 are Myanmar, Venezuela, and Zimbabwe. The bottom ten nations were the Central African Republic, Rwanda, Burundi, Algeria, Guinea-Bissau, Venezuela, Democratic Republic of Congo, Republic of Congo, Myanmar, and Zimbabwe.
Of course, libertarians would argue that the right to dispose of one’s labour and property is indivisible from other non-economic liberties, which is why I tend to view such exercises as having indicative value only. A country like Singapore, for example, ranks high on the charts for entrepreneurship but operates an-often stifling regulatory regime on personal behaviours, while other countries may allow more freedom in things like drugs, porn or gambling but also have weightier taxes and regulations on activities such as saving and investment.
Even so, it is pretty clear, as the Cato press release states, that places that are economically free and open to entrepreneurial vigor tend to be richer, and also nicer, places to live, while those that seek to freeze the economic status quo are also not just poorer, but tend also to be less pleasant, less tolerant towards minorities, harsher towards women, and generally crappier in the quality-of-life stakes.
Benjamin Friedman, hardly a fire-breathing free marketeer, also points out that wealth begets niceness in his recent book.
Economist Joseph Stiglitz writes in the Financial Times (sorry, subscription required to get to the link) that normal competitive pressures to improve service are not working in the British airports industry. The privatised British Airports Authority, now owned by Spanish based group Ferrovial, has nothing much to gain, he argues, from improving security because it gets no real benefit in terms of consumer response, but it does have an incentive to boost profits through cost cuts, which must, he says, come into conflict with security. Does he have a point?
The way in which BAA operates seems to me to be, at first glance, greatly influenced by government and its regulatory agencies, so I think it would be hard to come down too much on BAA’s neck in this case. The regulatory environment surrounding the current security furore is largely driven by government and looks likely to remain so. So it is probably academic to speculate how security would operate in a ‘pure’ free market environment. If it were possible for people to shop around for different levels of security, it would be interesting to see how businesses would responsd. If airlines could directly negotiate their own security policies with the customer without having to mediate via an airport business or government, then you might get an interesting spectrum. Some airlines would market themselves as high-security, enforcing tough checks on passengers, banning certain types of luggage. If you want to fly on such an airline, fine. Other airlines might go for a more relaxed approach, and passengers would fly in the knowledge that they were taking more of a chance in exchange for not having to put up with intrusive security. Come to that, I am in favour of busineses such as child-free airlines, for reasons spelled out by Jeff Randall recently).
And even if BAA were to remain dominant as an airports landowner, if passenger numbers dropped off alarmingly due to heavy-handed security and massive delays, then sooner or later shareholders of BAA would revolt, or sell the business, and new entrants to the airports business would offer something better. The problem with this subject of course is that we have become so used to the idea of a whole network of big airports being run by one former state-established company that it is sometimes hard to imagine something different. But it could change and there is plenty of thinking that can and should be done on how to use the incentives of the market to improve passenger service and give people the security they want.
Some related thoughts about airports and privatisation issues here.
American judge Alex Kozinski, interviewed recently in U.S. magazine Reason, is roughly billed as a ‘libertarian’ judge. He is asked, among various things, for his views on the infamous Kelo eminent domain decision, which relates to the case in which a local municipality in the States won the power to evict people from their own homes in order to redevelop a site for commercial and tax-raising reasons. It is a decision which has scandalised classical liberals and defenders of property rights. Yet Kozinski thinks the decision is fine, and comes up with the following jaw-dropper:
What’s the difference between taking property for public roads or anything else? Do only public automobiles travel on public roads? I don’t understand why it’s a problem. If the government thinks the city will benefit by having a road there instead of having your house so that people can drive their private cars on it, then it has to make that decision. Who owns the road really doesn’t matter. What matters is that it makes it easier for other people to get from point A to point B using their private vehicles for private purposes. You could say “but it’s my house and my private purpose is more important than your private purpose.” But we live in a society.
“We live in society”. And so what? This judge is using ‘society’ as a sort of mystical incantation to shut down debate. His argument seems in broad terms to be a sort of utilitarian one: if the interests of a supposed majority are served by seizing the property of some people, then this is okay so long as ‘fair’ compensation is paid. His argument seems not to accept that though certain outcomes may be desirable, that it is necessary for the state to be constrained by certain long-term rules and institutions, most emphatically, by the existence of property rights. The judge’s position seems to be “property rights be damned”. If we imagine there are alternate uses of property that might put a gleam in the eye of a politician with property developers in his back pocket, then there is no limit to the assaults on property rights that could be permitted under the Kozinski formulation.
Eminent domain – what we Brits call compulsory purchase – can be justified, if at all, for creating certain facilities like a road, military base or law court that are essential for the peaceful ordering of a society, essential for human life and in the interests of all, and not just because it makes life a bit nicer for some or most of us, whether we be motorists or whatever. What is terrible about the Kelo decision is that it was driven by commercial gain, not a clear public interest such as defence of the realm.
After all, if the economic pie really is swelled by people selling their homes for new development, then that would happen in a market, albeit perhaps not in the neat and tidy way favoured by power-grabbing government official. Yet this ‘libertarian’ judge cannot see that. May we be preserved from ‘libertarian’ judges like this.
For an excellent book about this subject, see this work by Timothy Sandefur.
As an aside, I should point out that the reason I keep focusing on this issue is because American legal rulings and arguments have a habit of travelling across the Big Pond.
Having recently become a struggling podcaster myself, I have been paying a lot more attention than I otherwise would to podcasters who sound like they have got past the struggling stage. And of all the podcasts I have heard, the one that has impressed me most in recent weeks has been this one, in which Russell Roberts interviews Bruce Bueno de Mesquita.
At Cafe Hayek, where I first learned about it, Roberts describes this podcast thus:
According to Bruce’s worldview, every leader, no matter what the system, tries to stay in office and prosper. The relentless application of this simple idea turns out to have very interesting implications for foreign aid, the relief of poverty around the world and about a thousand other things. Bruce has a big brain with a lot of interesting things to say. It’s a very long podcast (about an hour and a half) and it opens with a fairly intense discussion of the theories in Bruce’s book. From there he talks about a wide range of applications.
And at EconTalk, Roberts writes:
This lengthy and intense conversation covers a wide range of topics including the evil political genius of Lenin, the dark side of US foreign aid, the sinister machinations of King Leopold of Belgium, the natural resource curse, the British monarchy in the 11th century, term limits and the inevitable failure of the standard methods of fighting world poverty.
King Leopold II of Belgium is a particularly revealing example.
→ Continue reading: Bruce Bueno de Mesquita on the logic of political survival and the two faces of King Leopold II of Belgium
We would certainly be watching out for any profiteering that might occur…we wouldn’t want that to happen, there’s no reason for it.
Western Australian Royal Automotive Club (RAC) representative Mike Upton on today’s news that quotes for a Liquid Petroleum Gas conversion in passenger vehicles had jumped markedly from A$2500 to up to $4850 in response to the federal and state governments’ combined $3000 subsidy on the purchase and installation of such equipment.
And now for a story of a nature rarely seen in the pages of Samizdata – that of government policy incompetence resulting in farce. As in the rest of the world, we Australians are starting to rankle about paying the high petrol prices experienced at present. Politicians of all stripes sense votes in this issue, and they are right to do so – I am certain the average Australian firmly believes the government should Do Something about this added financial impost. Consequently, the Australian federal government has announced that it will Do Something About It by spending other peoples’ money. That should come as no surprise to those that watch governments with a w(e)ary eye, however this latest brain fart from the sages in Canberra – to subsidise Australian motorists if they convert their petrol powered cars to Liquid Petroleum Gas (LPG) – is more egregiously stupid and counterproductive than most, and deserves attention.
First, some background. LPG is widely available in Australian cities. All of the larger fuel stations sell it. LPG’s price is usually slightly less than half that of conventional unleaded petrol. I estimate that somewhere between 5-10% of cars have conversions enabling them to run on gas. A conversion kit, fitted, costs about A$2500. The federal government subsidy is worth up to A$2000 per conversion.
There are a number of fairly simple and certain predictions one can make from such a proposal, given the circumstances outlined above. Firstly, the cost of vehicle conversion will soar due to the massive increase in demand(1). No matter – the increased investment will soon be recouped through fuel savings. That is the whole point of the subsidy; alleviate the political headache of high fuel prices by getting Australians to switch from expensive petrol to cheap LPG. Of course, all things are static – especially prices.
Back in the unfortunate realm of reality, it is quite obvious that a return on the conversion investment is unlikely to be realised, because the price of LPG will also be a victim of incrementally increasing demand, as more and more gas-powered cars hit the road. The price of petrol may fall slightly, though oil (and thus petrol) is a global commodity with a more-or-less uniform price. Naturally, producers will sell their fuel in a market that provides the optimum return. Thus, supply will fall in concert with the slump in demand, leaving prices largely unchanged. And another factor to be considered by those who are thinking about taking up the government’s ostensibly generous offer – petrol excise is a major revenue earner for the Commonwealth. If this starts to dry up, lightly-taxed and increasingly-used LPG is going to look like quite an attractive target for the Treasury boys, narrowing the price gap further. The two fuels will probably reach price parity at some not-too-distant point; that is, the price of LPG will rise to meet that of petrol.
Simply put, this subsidy will achieve none of its stated aims, create a bunch of unintended negative consequences and is a most elementary economic blunder. The lesson – and it should be well understood by a government that trumpets its sound economic management at any opportunity – is that subsidies do far more harm than good. The big winners will be gas conversion component manufacturers and those installing this equipment. Gas suppliers also stand to benefit. The losers will be the broad pool of taxpayers (again) and those who have invested in a gas conversion kit in the vain hope of cheaper vehicle running costs.
What a marvellous outcome.
LPG-powered cars do, however, emit far lower levels of greenhouse pollutants than their petrol-powered counterparts. A nation of gas-powered cars may help Australia achieve its assigned Kyoto targets. We sensibly refrained from taking on that ball and chain, however we may as well sign the bloody treaty now – our adherence to it might be the only thing we have to show from the colossal waste of taxpayers’ money that is about to take place.
(1) = In my home state of Western Australia, our state government had already declared it was going to subsidise LPG conversions by $1000 per unit. This subsidy will now run on top of the federal government’s $2000 subsidy. Expect all conversions in WA to rise, probably overnight, from A$2500 to $3000+ when the subsidies come into force.
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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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