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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I am not much impressed with Roger Bootle’s drearily conventional arguments for what the UK economy needs.
“I have banged on before about decisions on key projects which have large public sector involvement but which may also hold the key to major private sector spending, e.g. over London’s airport capacity.”
Preposterous Keynesian fallacy at work. It presupposes that money allocated to some project via the political process is more likely to create a ‘multiplier’ than market driven uses of that money… and it assumes that the money taken by the state by force would not have been invested in something more worthwhile in aggregate if the decisions were left to its original owners before it was confiscated by the state.
But of course as it is easier to see something like an airport rather than the myriad of other uses the money would have gone to had it not been forced into that project, so somehow the big flashy ‘infrastructure’ protect is claimed to have driven knock-on investment and is therefore an obvious Good Thing. As Bastiat put it “That which is seen versus that which is not seen”.
Ain’t necessarily so and given the record of government decision making versus the more diffused decision making of markets, usually ain’t so.
A few months ago I gave a talk to Libertarian Home, of the sort that happen regularly at the Rose and Crown in Southwark. (They have a speakerless social at the same venue which I intend to be at, tomorrow.) My talk was … well, to put it kindly, it was somewhat less than the sum of its parts. It had its moments, but it didn’t add up. Worse, the more I struggled to pull it together, the longer it went on and the more incoherent it got.
But something good may yet have emerged from this muddle, because Libertarian Home’s Simon Gibbs and I recently agreed that it might make sense to rescue (i.e. for Simon Gibbs to rescue) one of the somewhat better bits of this talk and make it into a video short. Simon has now done this, with added graphics.
The subject is something I have already blogged about here, namely the tendency of statist measures to start out quite good, only later going wrong and then ever more wrong, and on the other hand the tendency of a truly free market, when a particular bit of it starts, to be a mess, and only somewhat later to start getting seriously good and in the long run superb. Two intersecting graphs, in other words, one going up and then down and down, and the other going down and then up and up.
My first label for this phenomenon involved hockey sticks, but when it comes to graphs the hockey stick is well and truly taken, and now I’m calling my graphs “alpha” graphs, because that’s how they look when put together.
Alas, even this bit of my talk could have been a whole lot more eloquent. For starters, I should have waved my arms around in a way that fitted how the graphs would look to the audience. As it was, I got them the wrong way around, sideways I mean, and hence somewhat clashing with what Simon does with them in his superimposed graphics. Nevertheless, the basic idea survives, I think, and is usefully provocative of further thought, as Simon demonstrates with his own further thoughts.
My own main further thought about the Alpha Graphs (here’s hoping those capitals catch on) is that the Adam Smith Institute should be mentioned in connection with them. One of the ASI’s basic tactical insights from way back is that there are indeed often many advantages to be gained and gamed by politically well-connected individuals or organisations or companies, from statist policies rather than free market policies, but that with a bit of cunning these tendencies can be countered, for instance by making the arrival of a competitive market very much to the advantage of a few big early participants, or with right-to-buy, right-to-sell arrangements with regard to such things as public housing that goes back into the market. It’s a matter of how you sell the new market, and to whom. Instead of just using Public Choice Theory (the Alpha Graphs being a tiny part of all that) to excuse libertarian policy failure; use it to point you in better (because more politically effective) policy directions.
That isn’t the complete answer to the problems described by the Alpha Graphs, but it is certainly a part of it.
The other thing I want to repeat in this posting is that I think that short videos are an excellent way to go, when it comes to spreading libertarian ideas, provided only that you know how to produce them adequately. (The technique has recently been used with great effectiveness by the Adam Smith Institute’s own Madsen Pirie to explicate basic economics.) I hope Simon Gibbs produces many more such video quickies in the next few years, and helps and encourages others to do the same, both in the form of excerpts from other bigger performances (by no means only from performances that he himself has recorded), and in the form of original creations of his own. Such a program could be a great developer of future libertarian star performers, as well as a chance for older libertarians like me to add their pennyworths.
Many developed nations are currently in the midst of the worst recession they have experienced in decades. I would like to call for an economic stimulus to aid in their recovery.
I am referring not to the useless Keynesian orgy of wealth destruction that is often meant by this word, but an obvious strategy for improving economic growth that (mysteriously) most politicians rarely consider.
My proposed means of stimulus is the mass firing of government employees.
Every government employee fired aids the economy in three distinct ways.
First, there is the direct cost of the salary, benefits and retirement of those employees, which must be sucked out of the rest of the economy through coercive taxation, weakening it. Each dollar we leave in the hands of ordinary people is a dollar they can then proceed to spend on things they really want, which is always better for the economy than a coerced expenditure. (To be technical, the Pareto optimality of free exchanges and non-optimality of coerced ones lead us to the conclusion that a dollar spent freely is always of more value than a dollar extracted by force.)
Second, there is the cost to the economy of the negative work most government employees do. Although a small fraction of government employees are engaged in jobs that would exist even in a free society, such as designing bridges and the like, most employees in a modern government spend their time interfering in the productivity of others, reducing their output. Every time we dismiss someone whose job is to produce new rules governing the licensing of hair stylists or who spends their time investigating the conduct of pedicab drivers, we increase the productivity of those who will no longer be harmed by the efforts of those government employees. (Indeed, some individual government employees doubtless reduce the productivity of hundreds or thousands of private workers.)
Third, there is the cost to the economy of having someone essentially idle. Most government employees do nothing of actual use, and there is an opportunity cost to that. Such people could instead be doing something of value with their labor — from making chairs to writing computer software to running private enterprises. Every additional chair that gets produced (provided there is market demand for it) increases the wealth of the world. Instead of being a net drain on society, each government employee, once dismissed from their job and allowed to find useful work instead, could be a net gain to society. (Even those government employees engaged in work that might exist even in a free society, such as delivering packages or teaching children, could do so more efficiently if employed in organizations that were disciplined by market mechanisms.)
I would go so far as to say that this triple effect of every government employee dismissal implies a multiplier effect. (The uninformed might naively consider only the direct cost savings and not the other added benefits.)
I will also argue that the more we fire, the greater the stimulus, without any obvious limit short of running out of people to dismiss. There isn’t even any need to wait for a recession to enjoy the salutary effects of such a stimulus — a nation experiencing high growth can still increase it by this mechanism. Unlike other forms of stimulus, it is also possible for even the most impoverished of nations to undertake such a program without the least fiscal risk.
I therefore implore elected officials to adopt such programs as soon as practical. Every day of delay costs.
Arranging a meeting and chairing the Q&A of it is hard to combine with actually listening to all that gets said. So when it comes to what I personally learned from Sam Bowman’s excellent talk at my home (already plugged here) last Friday, and from the various reactions to it from the rest of us, it’s a case of me picking out verbal cherries, rather than me now being able to describe the entire fruit bowl. Mostly what I want to say is what an excellent restart Sam Bowman gave to Brian’s Fridays 2.0.
Bowman’s starting point was the difference between, in Donald Rumsfeld’s famed phraseology, “known unknowns” and “unknown unknowns”, on the one hand the things you know you don’t know and quite consciously and deliberately choose to remain ignorant of, and on the other hand the things you don’t even know are out there to be known about.
I know that I don’t know how to sort my computer out when it malfunctions worse than trivially, but I have many friends more computer-savvy than I am. So for me, computer expertise is a known unknown. I am neglecting it, but do so “rationally”. I am approximately aware of what I am neglecting, and of the approximate costs attached to such neglect.
But what of unknown unknowns? As Sam Bowman so wisely said, those are harder to describe! If you could think of an example of an unknown unknown, then it wouldn’t be unknown, would it? The point being that unknown unknowns only reveal themselves in the form of surprises, “surprise” being a word that Bowman returned to quite a few times.
The case for a free society is not that we know exactly how it will be wonderful, but rather that it allows an infinity of different bets to be placed on where it is and where it’s headed and where it should be headed. Some of these bets will be right, a few very much so, although as much by luck as by judgement. In a centrally governed society, where one particular viewpoint is given the force of law, that one dominant judgement is almost certain to be wrong.
You can talk about “unknown unknowns” in retrospect, though, once they have finally made themselves known. Sam concentrated in particular on the now widely known, but a few years back not at all widely known, privileged legal position of those three now famous “ratings agencies”, S&P and … er … the other two. (He did of course say, but I wasn’t taking notes.) Also not at all widely understood were the Basel Accords (Sam rather charmingly called them what to my ear sounded more like the “Basil” Accords), which, in effect, positively demanded that banks to buy lots of “investments” of the sort then assumed prudent but subsequently revealed to be the opposite. The financial crash happened as a result of central bankers all scrupulously, in the name of “prudence” (remember her?), doing exactly as they were told to do and as they assumed they ought to do. This was a crash caused not by the neglect of duty, but by the misunderstanding of what duty really demanded. The bankers were not evil and greedy. They were misinformed. As is further illustrated by their own personal investment decisions, which were much the same as the investment decisions they made on behalf of others.
Others present may want to correct and fill out the above description of what Bowman said, Bowman himself in particular. I do not now plan to record my evenings for posterity, and this one wasn’t. I’d welcome comments about the wisdom of that decision. On the one hand, recoding would be a nice service for those who can’t attend. On the other, I want speakers to feel that here is a chance to explore, in a friendly setting, ideas they may not yet be completely on top of. I particularly like asking people to talk about things that they hadn’t perhaps realised were worth talking about, or people who have not themselves done much public speaking and maybe didn’t know they had it in them (in among other more practised and confident speakers). Recording equipment might get in the way of all that. There is, after all, nothing to stop someone else recording them talking about what they said at my place.
The reaction to Bowman’s talk can be summarised as: well, maybe, maybe not. The feeling of the room was that some people had given at least some thought to the possibility of looming financial disaster. Advice had been given to the higher-ups that was based on all kinds of assumptions holding true: provided this or that, then all will be well. The higher-ups tended to hear only the “all will be well” bit, while neglecting the earlier stuff about the assumptions being made. But the people who had given the advice certainly remembered the earlier bits. But what could they do, once those assumptions started to look seriously dodgy? The advisers were not themselves higher-ups.
For me the phrase of the night was “Too big to think about”, see my title above. Like many a memorable phrase, this one is adapted from another common phrase that has been doing the rounds: “Too big to fail”. Too big to fail refers to the dilemma of top decision makers when the proverbial waste matter had already hit the fan. “Too big to think about” refers to the problem of the uneasy lower-downers, the advisers, the quants and the specialists, the ones who did have very bad feelings, beforehand. Too big to think about referred to those for whom the unknown unknowns that eventually clobbered the higher-ups were actually, somewhat, known about beforehand. Various people in the room last Friday “actually heard people say” that if such-and-such does turn out as feared, then we’re all so f***ed there’s nothing that we, and certainly not that I, can do about it. We (I) will have far bigger problems than are covered by my little remit. So, we (I) just have to hope that all will be well, because if it isn’t, that’s … too big to think about!
Which leads inevitably on to the question of how much it was merely pure ignorance that was in play here, and to what extent moral turpitude was involved. How “pure”, that is to say, was the ignorance? There is, after all, a particular sort of immorality that consists of refusing to face unwelcome truths and to think about them in any detail. (Someone mentioned “unopened envelopes” at this point in the discussion.) The consensus of the evening, at any rate from where I stood (which tells you something of how crowded the room was), was that Bowman was making an illuminating extreme point, so to speak, but that the truth was somewhat more muddy and more morally complicated.
What was it about these financial institutions that made them vulnerable to such fingers-crossed, hope-for-the-best, ignore-the-worst, group-think? Mention was made of how a much more widely known-about-in-advance and much criticised set of rules, involving government guarantees of bank deposits, caused banks to be all about crazy risks and not at all about their own prudence, truly understood. That made particular sense to me.
I expected Sam’s talk to be good, and it was. But the quality of the Q&A struck me as being of a particularly high quality last Friday, with quite a few of those present having personal experience of the financial discussions and dilemmas being alluded to. Which is a further reason to maybe not freeze the speakers thoughts electronically. What if, in the light of what he hears from the floor, he ends up thinking slightly differently about his subject than he did when actually speaking?
What I particularly liked about the evening, aside from the quality of the speaker and the quality of the audience that the speaker attracted, was that, instead of assuming total stupidity or total villainy on the part of people from whom we hope and continue to hope for different and better thoughts and decisions, we were all, thanks to Sam Bowman’s eloquent lead, making a serious attempt to get inside the heads of these various decision-makers and their advisers. Arguing works far better if you seriously try to understand where other people are coming from and how they see the world, rather than just making insulting assumptions about their motives and thought processes. Us libertarians (in particular me libertarian) getting better at arguing is (for me) what these evenings are all about.
So you were expecting some long libertarian paean to globalisation, eh? Perhaps you thought I was going to use my usual taunt at ‘locavores’ that unlike them, I dislike the idea of poverty and so have nothing against purchasing products from the less wealthy rather than just from tax subsidised first world farmers…
Not this time… because sometimes a picture from inside Festung Samizdata is worth a thousand words.
This caught my eye:
A favorite “progressive” trope is that America’s middle class has stagnated economically since the 1970s. One version of this claim, made by Robert Reich, President Clinton’s labor secretary, is typical: “After three decades of flat wages during which almost all the gains of growth have gone to the very top,” he wrote in 2010, “the middle class no longer has the buying power to keep the economy going.” This trope is spectacularly wrong.
Don Boudreaux and Mark Perry, via the Wall Street Journal. (Via Cafe Hayek.)
That is not to say that the growth rate could not and should not have been better. But that is not the same thing.
A lot of British people have done a “John Galt” in recent years, it seems, according to UK member of Parliament Nick de Bois:
Mr de Bois said tax does play a part in emigration, but suggested that culture is a more important factor, warning that Britain should encourage people to succeed and get rich, not criticise them. “Government must help lead a culture change in this country that competes with the new economies, one where competitiveness and success are valued and personal achievement and personal wealth are respected, not pilloried,” he said.
If you are mystified by the “Galt” reference (most Samizdata regulars will know it), it refers to the plot of Ayn Rand’s Atlas Shrugged, in which a character called John Galt leads a “strike” of the top businessmen, scientists, artists and others to abandon their work at a time when such people are increasingly hampered by the State. In the US, the expression “Going Galt” has caught on to describe the sort of thing written about here.
Of course, emigration needn’t be a bad sign for a country and indeed, in some countries, emigration can relieve domestic pressures. In the 19th Century, large numbers of Britons left for the New World, seeking a better life. Of course, many from the around the world did so for reasons of persecution and poverty. The ability to exit a country is also one of the few things that might persuade an otherwise foolish government to pursue policies that encourage wealth creation rather than hurt it. As I have noted before, the ability of the super-rich – or indeed far less wealthy people – to get their money abroad, or move overseas, can be a healthy constraint on government. That is why I think “tax competition” between jurisdictions, far from being an evil, as leftist campaigners claim, is a good force in the world. And so it is important to bear in mind that when governments impose capital controls and exit visas, be very afraid.
In the meantime, although I don’t agree with all of its views, this book, Exceptional People: How Migrants Shaped Our World and Will Define Our Future, by Ian Goldin, Geoffrey Cameron and Meer Balarajan, is worth a read. (I am not so keen on some of its Transnational Progressivist leanings, though).
In a discussion about a computer game, someone mentioned a book about 18th century piracy: The Invisible Hook by Peter T. Leeson. Click to look inside and the first words you will read are:
I’m not a historian. Nor am I a pirate. I’m an economist with a long-standing interest in privately created law and order who happened to wonder one day how pirates cooperated since they had no government.
Sold!
Here is a classic piece of nonsense to start this week in chilly Britain:
The UK tax authority said the amount of tax that big companies may have underpaid by using artificial intercompany transactions to inappropriately reduce taxable profits has risen 48 percent last year. The figure comes as public anger grows over tax avoidance by big businesses and British MPs investigate possible remedies.
– (From a report from Reuters.)
I read this report carefully and nowhere does it say that the firms concerned have broken laws, engaged in fraud, or used violence or engaged in criminal acts. They are taking full advantage of the laws of the jurisdictions with which they have contact, as their shareholders would expect them to do in maximising shareholder returns. If politicians really wanted to reduce what they see as such dodgy tax avoidance, perhaps they should enact taxes that are simple, low, and flat. This is not rocket science, as the 2020 Tax Commission report issued last year showed.
The recent naming and shaming of Starbucks, for example, of simply making use of legal arrangements, was particularly odious. No wonder people are thinking that we are living in a world like something from the pages of Atlas Shrugged.
Tim Worstall writes about this sort of issue a lot, usually in the process of skewering that socialist “accountant” from Wandsworth, Richard Murphy. Tim is always entertaining and instructive at the same time.
It sometimes makes me wonder why so few people seem to draw the connections between stories in the media that cry out to be connected. Here is one example, to do with food:
The price of basic food items could rise by as much as five per cent this year because of miserable weather last autumn, the managing director of Waitrose has warned.
Mark Price said food price inflation is already hovering at three to three and a half per cent, but this is just “the tip of the iceberg” and prices could increase even more dramatically over the coming months.
Produce such as bread and vegetables will become up to five per cent more expensive because of poor crop yields leading to a shortage of supply, he warned.
Many farmers are reporting that they still have not planted crops for 2013 because of the torrential rainfall which caused flooding across parts of Britain late last year.
From the Daily Telegraph.
Then there is this item about the waste of food in some countries:
Today, we produce about four billion metric tonnes of food per annum. Yet due to poor practices in harvesting, storage and transportation, as well as market and consumer wastage, it is estimated that 30–50% (or 1.2–2 billion tonnes) of all food produced never reaches a human stomach. Furthermore, this figure does not reflect the fact that large amounts of land, energy, fertilisers and water have also been lost in the production of foodstuffs which simply end up as waste. This level of wastage is a tragedy that cannot continue if we are to succeed in the challenge of sustainably meeting our future food demands.
Something is wrong with this picture. On the one hand, we are warned that food could be in much more scarce supply, hence the risk of skyrocketing prices; on the other, we produce oodles of the stuff and yet are wasting it, in various ways (poor storage, silly bureaucratic rules about sell-by dates, lack of basic knowledge about cooking, the ease of throwing out food rubbish.) It seems to me that inasmuch as there is a genuine problem, it is that we don’t have a full free market in food. If those who talk in horror about rich Westerners chucking out half-eaten meals really are disgusted by this, how much more disgusting are policies such as EU payments to farmers not to produce food under what is called “set aside”? (This is a policy pioneered by that champion of bad economic ideas, FDR, in the 1930s). And tax-subsidies for “biofuels” that distort agriculture markets are another glaring form of waste, surely. (It is also worth bearing in mind that state-subsidised farming is often also the most destructive from a sustainability point of view; the European Common Agricultural Policy saw the use of modern fertilisers and pesticides increase significantly).
If food prices rise due to a natural shift in the supply-demand imbalance, rather than due to the distortions of the State, then we wasteful Westerners will have to relearn some old habits, whether it be never leaving food on a plate and wise storage of our food. And just to finish on this thought: how much more severe would our shortages be, if, instead of being able to tap into a global supply of food, we had to rely on purely “local” produce, as the “locavores” would have us do?
On slightly tangential point, I read that a once-prominent opponent of GM foods has changed his mind and now admits that much of the opposition was not based on honest science and reasoning.
David Thompson’s latest Elsewhere posting ends very entertainingly. He quotes Matt Welch, Jonah Goldberg and Victor Davis Hanson, before himself adding this very quotable paragraph:
For some, professions of egalitarianism and socialist belly fire are a kind of rhetorical chaff – a way to elevate oneself as More Compassionate Than Thou, while deflecting envy from below. (“Please don’t hate me for being richer than you. Look, over there – they have even more, or almost as much – let’s all hiss at them!”) Vicarious philanthropy – giving away freely other people’s earnings – is a remarkably effective ruse, so much so it seems to encourage a certain disregard for dissonance, as demonstrated, for example, by the Guardian’s editor Alan Rusbridger in this comical exchange with Piers Morgan. And by the Guardian’s imperious class warrior Polly Toynbee, whose rhetoric was contrasted with her actual lifestyle and was promptly reduced to indignant spluttering on national television. Similar obliviousness is also displayed by the millionaire actor Jeremy Irons, who denounces consumerism and asks, “How many clothes do people need?” All while owning no fewer than seven houses, one of which is a peach-coloured castle. No, you’re not allowed to laugh. Because his wife is also very Green and “deeply socialist.”
Good knockabout stuff. It would seem that Piers Morgan has his uses.
But, there is always a danger with this way of arguing, where you challenge someone for not living in accordance with his or her own bad ideas. The danger being that you may forget to point out that they are bad ideas. Often, there is so much demanding that whoever it is should practice what he preaches, that it is forgotten what stupid preaching it is.
Thompson does not make this mistake, as his swipe at vicarious philanthropy illustrates, as do all the other postings on his site that criticise other bad ideas. But others do.
Polly Toynbee’s class warfare preaching would be just as wrong if she preached it while living in a cardboard box under a bridge, and it might also be worse, on account of being more persuasive. It is her preaching I object to, not her lifestyle.
Jeremy Irons owning seven houses isn’t going to cause our descendants to fry or starve to death, any more than will us masses wanting to have more frocks and suits and shirts than we could get by with. The fact that, having earned a ton of money in the movies, Irons chooses to invest in property in a big way, and then, having invested in it, chooses to live in quite a lot of it, is evidence that, despite the foolishness of his professed opinions, his actual opinions, the ones he acts on, are less foolish. This man certainly knows how to live!
If you demand consistency from people, be sure to be clear what sort of consistency you are demanding. I want Irons to carry on living as he wants to, using the money he has earned. I just want him to stop spouting unintelligent and uncharitable nonsense about how we poorer people ought to fret about our shopping habits. Let Polly remain unequally rich, and continue to enjoy her Italian holidays. Let her merely shut up about the goodness of enforced equality.
I am not saying that Thompson’s comments are wrong. Pointing out that the Toynbee and Irons lifestyles clash with their publicly expressed opinions is well worth doing. But the idea of doing this, which must never be lost sight of in all the complaints about hypocrisy, is not to shame these grandees into living differently. It is to shame them into talking less public nonsense.
This all too serious joke has steadily gained traction among the self anointed cognoscenti.
Probably one reason they think “Hope®” it will work is because it is “legal”.
We don’t make the loopholes. We just find them. The Treasury can’t print money on its own, because the money supply is supposed to be the strict purview of the Federal Reserve … but that might not be quite so strict after all, thanks to a coin-sized exception. Congress passed a law in 1997, later amended in 2000, that gives the Secretary of the Treasury the authority to mint platinum coins, and only platinum coins, in whatever denomination and quantity he or she wants. That could be $100, or $1,000, or … $1 trillion.
And we know that Congress has the power “to coin money and regulate the value thereof”, right? The Constitution says so, right?
→ Continue reading: To coin money and regulate the value thereof
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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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