Saturday, 4 February 2023

China: A House Divided




Is there a difference between a "market society" and a capitalist one? What exactly makes the difference that makes that difference, and on which side of that divide does, and will, China sit? Author of the book 'Is Capitalism Sustainable' Michael Munger answers in this guest post ...

China: A House Divided

BY MICHAEL MUNGER

THERE HAVE BEEN CLAIMS that China’s enormous economic growth and widely shared prosperity are the result of turning to capitalism. I think this is not true; China is not capitalist.

Of course, that depends on having a definition of capitalism that is clear, and that does not simply apply to all nations. It also requires a definition that is not so naively aspirational that no nation could satisfy the conditions to qualify as truly capitalist, because of the tendency toward cronyism in democracies.

I have come to think of it in terms of concentric circles, each smaller than, and fully contained in, the larger category. For me, the categories are exchange relations, market societies, and capitalism. All capitalist countries are market societies, and use exchange relations. But many market societies are not capitalist.


Exchange relations

EXCHANGE IS A MEANS of improving the welfare of both (all) parties to an exchange, if the exchange is voluntary. I have written a number of papers (this, and this) on the nature of “truly voluntary,” or euvoluntary, exchanges. Exchange that is not voluntary, but coerced by human agency, is theft. Such exchanges can look voluntary, if routinized over time, as in the case of Mancur Olson’s “stationary bandit.”

Voluntary exchange must leave the exchangers better off, because they are not obliged to exchange and yet choose to do so. The bases of voluntary exchange are three:
  1. Different preferences, same endowments
  2. Different endowments, same preferences
  3. Division of labour, with specialisation that creates what looks like different endowments, on steroids
More simply, if I like bananas and you like oranges, and we both have bananas and oranges, then I’ll give up some of my oranges in exchange for your bananas, and we are both better off, even with the same total amount of stuff. If I have many bananas, and you have many oranges, and we both like fruit salad, again we exchange and we are both better off.

The really interesting example is the one that Adam Smith and David Ricardo described, resulting from division of labour and comparative advantage. If we were all clones, but specialised, we would soon have more stuff than if each of us supplied all of our own individual needs. And if that specialisation were further guided by differences in endowments, climate, natural resources, and local skills, the increase in the total amount of products available is redoubled and redoubled again.

Exchange is likely to have been common in the earliest days of human clans and tribes of hunter-gatherers. Groups of 150 roaming the terrain could likely find most of what they needed. But some people learned how to make clothing, and others learned how to make spear points and attach those sharpened stones to sticks to make spears. Division of labour, even at this level, rewarded tribes that fostered internal specialisation, so that the group could increase its total output.

But, as Adam Smith noted, division of labour is limited by the extent of the market. So the pressure to extend exchange beyond internal specialisation in a tribe created rewards to figuring out how to multiply transactions over greater distances and larger numbers of people who can specialise.

Market relations

EXCHANGE, IN THE SENSE of barter, is cumbersome, and transaction costs can hinder all but the simplest exchanges. Barter requires a “double coincidence of wants,” where I want what you have but we can only exchange if I happen to have something that you want in exchange, and we can find each other.

Markets are a subset of exchange relations where institutions have emerged, or perhaps been created, to reduce the transaction costs of impersonal and geographically extensive exchange. Some widely accepted currency, an accounting system, a shared system of weights and measures, and a system for adjudicating disputes over contract breaches using rules that are consistent and predictable, all transform simple exchange into something else entirely. Markets enable the degree of division of labour to reach much greater elaboration, and create much faster growth in the wealth of market participants. Adam Smith’s observation that division of labour is limited by the extent of the market is a recognition that increasing returns are not only the source of wealth, but a requirement that commercial society evolves institutions to handle the increased volume of trade, and the commodification of many aspects of human activity.

Capitalism

THE CONSTRAINT ON THE expansion of markets is partly the difficulty of extending shared commercial norms over physical and cultural distances. But markets and their consequent division of labour can also be held back by a lack of liquid capital. Physical capital is the buildings, machines, tools, and technology that increase the productivity of labor and foster the creation of products and services. Liquid capital is the product of saving, or foregone consumption, that allows entrepreneurs to use abstract value in the form of money to give physical form to their conceptions of production. The genius of capitalism in the US can be seen in Silicon Valley or Wall Street, where “venture capitalists” accept shares of ownership in a potential venture after they provide the liquidity that the entrepreneurial founders need to give their ideas physical shape and structure. This conversion of the capital structure from liquid form, which could be invested anywhere, into physical form, which is now at risk because it cannot be easily turned back into cash, is both the source of profit and the source of risk in a capitalist system.

Capitalism, however, also creates concentrations of economic power because of the ability of successful investors and entrepreneurs to gather large amounts of wealth. Ownership in a capitalist system is both the mechanism for raising liquid capital—by selling shares that are claims against the value of future profits—and a means of controlling substantial resources independent from state direction and control. The private ownership of tools and materials that characterise a market system are on a much smaller scale than the ownership of land and a controlling interest in the shares of joint stock corporations. Nations that do not have the corporate form of private ownership are likely to run up against capital constraints, as it is difficult to generate liquidity on a scale, and in a time frame, that allows the successful exploitation of profit opportunities.

So, is China Capitalist?

WHICH BRINGS ME BACK to the question posed at the outset: Is China capitalist? The answer is NO; China is a commercial market system, [what Ludwig Von Mises called a "hampered market"] but it is not capitalist. China’s great increase in total wealth, and the widely distributed nature of that increase in prosperity resulting in an unprecedented decline in poverty, were the product of the adoption of market reforms starting in 1978. There were some early hopes that China might continue to evolve in the direction of capitalism, but the government has (correctly) seen that actual capitalism would create what are, in effect, countervailing centers of power in great concentrations of wealth in the hands of owners of corporations.

Markets are systems that produce wealth and sharply reduce poverty. Capitalism is a system for raising liquid capital and creating countervailing power centers that constrain totalitarian aspirations of government. As long as the Chinese state is primarily centralized and authoritarian, capitalism will be blocked. But that means that Chinese economic growth will be strangled, as capital becomes more and more constrained.

To paraphrase Abraham Lincoln, the Chinese commercial state cannot stand divided against itself. China will not cease to exist, but it will cease to be divided. It will become all authoritarian, or it will become capitalist.


MICHAEL MUNGER is a Professor of Political Science, Economics, and Public Policy at Duke University and Senior Fellow of the American Institute for Economic Research.
His degrees are from Davidson College, Washingon University in St. Louis, and Washington University, and his books include the best-selling Is Capitalism Sustainable?.
Munger’s research interests include regulation, political institutions, and political economy.
This post first appeared at the AIER blog.




Friday, 3 February 2023

"The Phillips Curve model is wrong because Keynesians get causality reversed."


"In fact, the Keynesian Phillips curve model is simply wrong. It’s not wrong because there is no relationship between inflation and unemployment. A sharp fall in both wage and price inflation tends to be associated with a temporary rise in unemployment. Rather the Phillips Curve model is wrong because Keynesians get causality reversed. They assume that causation goes from economic overheating to wage and price inflation, whereas the opposite is more nearly true. To be precise, it is unexpected increases in nominal growth in spending that cause both rising inflation and falling unemployment."
~ Scott Sumner, from his post 'Fortunately, this isn't the Volcker disinflation'

"Tariffs are love."


"Inflation is high and the government says we’re in a cost-of-living crisis, with groceries and building materials front and centre. But those Korean companies’ roofing steel, along with galvanised wire from Malaysia and China, are hit with anti-dumping duties [by the NZ Government]. So you’re protected from affordable building products. Doesn’t it warm your heart? Tariffs are love."
~ Eric Crampton, from his post 'Cost of living absurdities'


Thursday, 2 February 2023

"And all that extra aerosol matters, of course, because aerosols seed clouds, which change the weather."


"The science is settled, except we only just realised that the benzene and toluene gas over the vast Southern Ocean were not man-made pollutants after all, but were made by industrious phytoplankton. For the first time someone went and measured the benzene and toluene in the water and discovered that, instead of being a sink for human pollutants in the air above, the ocean was the source.
    "This matters because these two gases increased the amount of organic aerosols by, wait for it, between 8% and up to 80%, in bursts. And all that extra aerosol matters, of course, because aerosols seed clouds, which change the weather.
    "And the expert climate models, upon which a $1.5 Trillion dollar industry depends on for its very existence, did not know this. If hypothetically there has been less phytoplankton in the worlds oceans in the last few decades, there may also have been less cloud cover, and thus more warming. But who knows?
    "The modellers are always saying climate change can’t be natural because they can’t think of anything else that could have could have caused the warming, then people keep finding another factor they forgot to put in the models…"

~ Jo Nova, from her post 'Ocean life is seeding the clouds above it, and the modellers didn’t know'


Did someone say "Willy Jackson"?



"Benefits earmarked for a particular group are especially helpful for that group’s political leadership, even if these benefits are less valuable than alternative benefits the group might have obtained by alternative policies benefiting the society as a whole. Moreover, the attempt to obtain earmarked benefits may arouse far more opposition from other groups, therefore reducing the likelihood or the magnitude of such benefits, but they are still in the interest of the group’s political leaders. If the group benefits as members of the larger society, that is no feather in the cap of racial or ethnic leaders.....
    "In short, political 'solutions' tend to misconceive the basic issues. However, these misconceptions may serve the political leadership well, even if they are counterproductive for the racial or ethnic group in whose name they speak."

 

"My conclusion isn’t just that ChatGPT is another con game—it’s the biggest one of them all."


"ChatGPT, the AI bot, [is] the hottest thing in tech right now.
    "Judging by my Twitter feed, ChatGPT is hotter than Wordle and Taylor Swift combined.
    "It’s even hotter than its predecessor Sam Bankman-Fried, who was doing something similar 12 months ago. ChatGPT is just better than SamFTX in every way. It can’t even be extradited—because it’s just a bot.
    "People love it. People have confidence in it.
    "They want to use it for everything—legal work, medical advice, term papers, or even writing Substack columns [like mine] ....
    "Instead of offering up my opinions on this, I’ll just share some tweets from knowledgeable observers who are starting to suspect the con.
    "I’ll let you decide for yourself whether this measures up to a confidence game....
    "My conclusion isn’t just that ChatGPT is another con game—it’s the biggest one of them all. Microsoft even wants to hand over its entire search engine to this AI bot. Premium subscriptions are already available.
    "Some of you will tell me that I’m making a hasty judgment. ChatGPT will get better, they say. It will get smarter.
    "That’s exactly what I’m afraid of. The ethics code should have been inserted at the ground level—but it wasn’t. At this point, incremental improvements only make it better at its confidence game.
    "But in one way, it’s all so fitting. The con artist always gives people exactly what they want. And in a post-truth society, nobody does this better than AI. So I predict great things for ChatGPT—at least in economic terms. It will certainly live up to Sneaky Pete’s standards:
    "'I give people confidence. They give me money.'"

Wednesday, 1 February 2023

"So what’s changed? The words have."


"Labour has a new leader which has given the country a new Prime Minister.
    "There’s also a new deputy and today we’ve got some new ministers.
    "But it’s not a new government.
    "Most of the new cabinet have been part of the team that’s been governing since 2017, and the rest of them are now into their third year in the current government.
    "So what’s changed?
    "The words have."

~ Eli Ludemann, from her post 'What’s changed?'

 

A philosopher's political spectrum...

 


Credit for the rankings goes to the freedom-loving philosopher Stephen Hicks, who shows some of his working here.


Tuesday, 31 January 2023

Some gratitude amidst the flooding

 

[Pic source Classic Kiwi]

Anger is said to be the second stage of grieving. The first stage however is denial.

It's natural, when disasters happen, to find someone to blame. To vent your anger. When a natural disaster happens, however, that's pretty pointless. It looks like anger redirected. Like trying to deny the reality of the disaster that's just happened.

I think we've seen a lot of that these lasts few days, which is certainly understandable. There have been many moments of humour in the sudden change in the city's landscape (kids and dogs playing in the floodwater*; people paragliding on the new Lake Domain; ) and at least one blessing (I for one can only celebrate the cancellation of the appalling Elton John) but for many it's been an unrelieved bloody disaster. Who wouldn't want to grieve, and to vent. To be angry at the folk you think caused it!

Sure, there is plenty of bureaucratic bungling in evidence around Auckland since last Friday -- much of it arguably because of Rodney Hide's super-sized bloody council (a predictable man-made disaster about whose formation I'm still angry). And much of it, too, because too many have come to expect far too much from government appointees and electees, as if the power of government somehow makes them all super-human and immune to common bloody sense (well, that last but at least is true). 

But what caused the disaster is not those non-entities, you know; it's all that bloody rain!

So the anger against Mayor Wayne Brown for saying this or not saying that -- or for not saying it early enough, or often enough -- looks to me more like anger redirected from the heavens, where the blame really lies for sending down rain in such 1-in-500 year buckets -- and against which there's really no point in ranting. That would literally be old men (and women) yelling at clouds.

We've had (and are still having, it seems) a disaster here in Auckland. A natural disaster. And it seems to me that instead of angry ranting about who said what to whom, and how, it may now be time to begin counting some blessings.

Reality has thrown at us Aucklanders rainfall of a magnitude that just isn't designed for. Engineer's design flood-resistant infrastructure for a 1-in-100 year event. Those buckets of rain represent something like a 1-in-500 year event. Rainfall of a magnitude that no stormwater or infrastructure engineer would have expected, or could realistically design for. Monsoon-level rain that's caused at least four deaths. And yet for all the many slips and outages, and the tragedy of those lives lost and the many homes, families and businesses disrupted, we've come through it a whole lot better than you might have expected.

With exceptions so notable as to be newsworthy, the vast majority of us are still supplied with water and power and refrigeration, and are as warm and dry as we want to be -- and able to offer help to those who aren't.

That it isn't a whole lot worse than it is is almost entirely due to the volunteers and emergency services who have responded to the disaster (who generally do get the praise they deserve at such times), and to the skill of our engineers in designing and building the infrastructure and flood measures that have coped with something well beyond their design load (who however are generally unsung).

The Auckland Domain's new lake, holding water (as designed)
to minimise the water's impact downhill otherwise [pic by Paul. D.]

Things like the culverts they've designed which are taking away the masses water; the nib walls, flood walls, stop banks and bunds that have kept water away from where it shouldn't be; the de-watering pipes in soft ground; the rain  gardens and water diversion devices, which help to slow down the damaging speed at which the water rushes past we fragile humans; there permeable paving that allows water to flow into the ground instead of in damaging sheets across it, and these down overloaded pipes; the work done over many years in identifying and re-engineering all these ways potentially the most dangerous places...

It's not straightforward. Many of the places most effected today were once swamps only a century-or-so ago, or are on soft land that's spent centuries frittering away, and nature is now doing its level best to return those places to their natural state. Yet despite the unprecedented scale of nature's efforts, well beyond what was designed for -- and with the effect of all that rainfall magnified by all the hard urban surfaces built across the city over the last century -- with some well-reported exceptions those places have all held.

[Pic source: Auckland Art Gallery – Toi o Tāmaki. Caption source: Te Ara]

We may not have, nor can afford, world-leading infrastructure. But despite this, that we aren't seeing huge casualty figures and an extremity of damage is something to applaud; applause directed especially to all those unsung engineers who so rarely receive any credit for anything -- and to the folk who created sufficient capital to put their ingenious design-work in place.

So as the city begins to endure the predicted second round of what reality can throw at us, I'm thinking that instead of anger at the grey ones for being as inept as always, we might instead direct more gratitude at those folk who deserve it.

It's time for us all to pause for a moment, and thank an engineer.

We may doubt the just proportion of good to ill.
There is much in nature against us. But we forget;
Take nature altogether since time began,
Including human nature, in peace and war,
And it must be a little more in favour of man,
Say a fraction of one percent at the very least,
Or our number living wouldn’t be steadily more,
Our hold on the planet wouldn’t have so increased.
~ Robert Frost

* * * *

* Kids, don't try this at home without washing your hands afterwards.

Trust the government, they said


"How much confidence should the public have in authorities managing natural disasters? Not much, judging by the farcical way in which the civil defence emergence in Auckland has played out.
    "The way authorities dealt with Auckland’s extreme weather on Friday illustrated how hit-and-miss our civil defence emergency system is. In particular, the communications failures made the crisis much worse than it needed to be.... All central and government agencies did a very bad job of communicating with Aucklanders on Friday evening.
    "Auckland’s Emergency Management proved particularly unhelpful to the public during the chaos of Friday.... As for New Zealand’s civil defence mobile phone message warning system, this failed to kick in. It only issued warnings to Aucklanders’ phones on Sunday night – over 48 hours too late.
    "Increasingly, the bureaucracy is being blamed for the poor management of Auckland’s weather disaster.... [T]oo often the system can become bureaupathic, with rules and procedures becoming more important than producing the right outcomes. Officials themselves can become more driven by self-interest than by serving the public interest....
    "We saw on Friday night that one of the worst examples of this was when Waka Kotahi – the government agency tasked with roads – logged off early in the disaster, tweeting that they were finishing for the night about 7:30pm, and leaving road users to their own devices.
    "Of course, the blame can’t be all shifted to the bureaucracy – the Mayor himself has proven to be the worst communicator of all.... Today’s 'Herald' editorial points out that Brown will be remembered for his 'tone-deaf' defence on Friday night that 'my role isn’t to rush out with buckets.'
    "Although the mayor [and] emergency systems and authorities obviously didn’t create the disaster, they had a responsibility to mitigate its worse effects, which they did not do...."


Monday, 30 January 2023

"Finally, Jacinda herself said the abuse and threats had no effect on her retirement decision, and I believe her."


"Finally, Jacinda herself said the abuse and threats had no effect on her retirement decision, and I believe her. I do so as I’d picked her retirement on the date she announced it, on this site, back in 2021. Her behaviour last year bore that prediction out with seemingly non-stop indulgent last hurrah joy-riding international travelling with teams of colleagues at our expense.
    "Jacinda had been an MP for eleven years without making a mark then a series of improbable events flushed her from obscurity into the PM’s office and subsequently the international lime-light, all beginning with Winston’s shock enthroning her, motivated by revenge against the Nats.
    "Jacinda is a level-headed individual. She knew the adulation was ridiculous and said so to the 'Guardian' two years back, saying she lay awake at night suffering from imposter syndrome, once the absurd Joan of Arc Jacindamania rubbish began."
~ Bob Jones, from his post 'Anonymous Threats'


On peer-reviewed science: "The results are in. It failed."


"[T]he hypothesis seemed so obviously true: science will be better off if we have someone check every paper and reject the ones that don’t pass muster. They called it 'peer review.'
    "This was a massive change. From antiquity to modernity, scientists wrote letters and circulated monographs, and the main barriers stopping them from communicating their findings were the cost of paper, postage, or a printing press, or on rare occasions, the cost of a visit from the Catholic Church. Scientific journals appeared in the 1600s, but they operated more like magazines or newsletters, and their processes of picking articles ranged from 'we print whatever we get' to 'the editor asks his friend what he thinks' to 'the whole society votes.' Sometimes journals couldn’t get enough papers to publish, so editors had to go around begging their friends to submit manuscripts, or fill the space themselves. Scientific publishing remained a hodgepodge for centuries.
    "(Only one of Einstein’s papers was ever peer-reviewed, by the way, and he was so surprised and upset that he published his paper in a different journal instead.)
    "That all changed after World War II. Governments poured funding into research, and they convened 'peer reviewers' to ensure they weren’t wasting their money on foolish proposals. That funding turned into a deluge of papers, and journals that previously struggled to fill their pages now struggled to pick which articles to print. Reviewing papers before publication, which was 'quite rare' until the 1960s, became much more common. Then it became universal.
    "Now pretty much every journal uses outside experts to vet papers, and papers that don’t please reviewers get rejected. You can still write to your friends about your findings, but hiring committees and grant agencies act as if the only science that exists is the stuff published in peer-reviewed journals. This is the grand experiment we’ve been running for six decades.
    "The results are in. It failed....
    "[I]f peer review improved science, that should be pretty obvious, and we should be pretty upset and embarrassed if it didn’t.
    "It didn’t. In all sorts of different fields, research productivity has been flat or declining for decades, and peer review doesn’t seem to have changed that trend. New ideas are failing to displace older ones. Many peer-reviewed findings don’t replicate, and most of them may be straight-up false. When you ask scientists to rate 20th century discoveries in physics, medicine, and chemistry that won Nobel Prizes, they say the ones that came out before peer review are just as good or even better than the ones that came out afterward. In fact, you can’t even ask them to rate the Nobel Prize-winning discoveries from the 1990s and 2000s because there aren’t enough of them.
    "Of course, a lot of other stuff has changed since World War II. We did a terrible job running this experiment, so it’s all confounded. All we can say from these big trends is that we have no idea whether peer review helped; it might have hurt, it cost a ton, and the current state of the scientific literature is pretty abysmal. In this biz, we call this a total flop."
~ "postdoctoral research scholar" Adam Mastroianni on 'The Rise and Fall of Peer Review' (his follow-up post is here) [Hat tip Econ Log]

 

“Unlike government, a corporation has no legal authority to force anyone to do anything. Bottom line: If you don’t like a corporation, you can avoid it. You do not have this choice with government."


“Unlike government, a corporation has no legal authority to force anyone to do anything. It can’t tax you, arrest you, or conscript you. It can’t force you to work for it. It can’t force you to invest in it. It can’t force you to buy its products. [Anti-business author Joe] Bakan, however, says corporations 'determine what we eat, what we watch, what we wear, where we work, and what we do.' No, they don’t. They make us offers, which we can accept or refuse. But those offers give us countless options to improve our lives—options we wouldn’t have otherwise. Far from a threat, the earned economic power of corporations brings us great benefits.
    "People interact with corporations voluntarily. If a corporation sells a shoddy product, people can refrain from buying it. If it sets prices they regard as too high, they can negotiate or look for a better deal. If it pays low wages or lays off employees, they can work elsewhere or start their own business. If people think Google and Facebook collect too much personal data while failing to properly safeguard it, they can use other platforms or services. Bottom line: If you don’t like a corporation, you can avoid it. You do not have this choice with government, though. Ignore the IRS, and fines, penalties, or prison await you. You can opt out of Google and Facebook, but you can’t opt out of the surveillance dragnet of the [surveillance state].”

Saturday, 28 January 2023

"Society is nothing but the combination of individuals for cooperative effort." Meaning, we generally gain from the existence of others


“In the state of isolation, our wants exceed our productive capacities. By virtue of exchange, our productive capacities come to exceed our immediate wants. Implicit in exchange is division of labour...”
~ Frederic Bastiat, from his Economic Harmonies

“The individual lives and acts within society. But society is nothing but the combination of individuals for cooperative effort. It exists nowhere else than in the actions of individual men.”
~ Ludwig Von Mises, from, his book Human Action

When you live in a rational society, where men are free to trade, you receive an incalculable bonus: the material value of your work is determined not only by your effort, but by the effort of the best productive minds who exist in the world around you. When you work in a modern factory, you are paid, not only for your labour, but for all the productive genius which has made that factory possible...”
~ Ayn Rand from her essay 'What is Capitalism?'

“Economic competition is not a process by which the success of the biologically fit brings about the extermination of the biologically weak. On the contrary, it is a process by which the success of better products and more efficient methods of production promotes the survival and well-being of all. It is a process in which the success of the more able raises the productivity and improves the standard of living of the less able....
    "So far from being the law of the jungle, the freedom of economic competition emerges as the true principle of the universal brotherhood of man.”
~ George Reisman, from his book Capitalism
"Economic competition is one of the unfortunate accidents of terminology; what it means is simply the freedom of individuals to cooperate through exchange with the others who offer (or accept) the best terms."
~ Frank Knight, from his 1944 lecture “The Planful Act: The Possibilities and Limitations of Collective Rationality,” as reprinted in Knight’s 1947 collection, Freedom and Reform [hat tip Cafe Hayek]

“The very fact that an exchange takes place is proof that there must necessarily be profit in it for both the contracting parties; otherwise it would not be made. Hence, every exchange represents two gains for humanity.”
- Etienne Bonnot de Condillac, from his Le commerce et le gouvernement considérés relativement l'un à l'autre

Friday, 27 January 2023

Watch out for his woggle


"Chris Hipkins is copping the standard new PM honeymoon treatment from the media, albeit somewhat muted. It won’t last and [his] government will be thrashed in October. The only thing which can save it is World War 3 breaking out. Chris massively fails an all-important test I originated in the highly politicised mid 1970s, this after Bill Rowling inherited the office following Kirk’s death, namely no-one could ever be elected as PM if one could imagine him in a scout master’s uniform."
~ Bob Jones, from his post 'Political Imagery'

"Coase insisted that government should largely limit itself to defining and enforcing property rights."


"[Ronald] Coase showed that as long as property rights are clear and secure, and people can bargain freely with each other, nonphysical resources (such as the electromagnetic spectrum) will eventually be owned by those people and businesses that use these resources most productively from society's perspective....
    "Suppose [for example, that bureaucrats] award a part of the spectrum to a station that insists on broadcasting insect noises. That station is unlikely to be the one that uses that part of the spectrum most productively from the public's point of view. Another station that has plans to use that part of the spectrum in ways more useful to the public — say, by broadcasting pop music — will offer to purchase the insect station's property right in the spectrum. And the insect station will voluntarily sell because the pop-music station will attach a higher value to owning that part of the spectrum than will the insect station....
    "An upshot of Coase's insight is that command-and-control regulations are almost always harmful, or at least suboptimal. Such regulations dictate in detail how firms should behave and deny them the flexibility to find better ways to achieve the same desired outcomes. If each steel producer, say, is told that it must install pollution scrubbers on its factory's smokestacks, every steel producer is barred from using less costly ways to reduce pollution.
    "Coase insisted that government should largely limit itself to defining and enforcing property rights. Bargaining in markets — bargaining to buy, to sell and to use such rights as individuals on the spot judge best — will almost always generate better outcomes than will top-down diktats."
~ Don Boudreaux, from his op-ed 'Property Rights' Importance'

Thursday, 26 January 2023

"The leaders of any political system—no matter how enlightened—inevitably convince themselves that *now* freedom of speech has gone too far.”



"In recent years, a growing chorus of voices has become increasingly hostile to free speech. Certain people, ideas, and narratives, we are told, must be suppressed in order to combat 'hate speech,' stop misinformation, and 'protect democracy.' As Jacob Mchangama explains in his book, Free Speech: A Global History from Socrates to Social Media, these arguments are not new. The 'justifications for limiting free speech in the twenty-first century,' he observes, 'have more in common with those used many centuries past than perhaps we would like to admit'....
    "One reason for this, Mchangama writes, is that 'the introduction of free speech sets in motion a process of entropy. The leaders of any political system—no matter how enlightened—inevitably convince themselves that now freedom of speech has gone too far'.”
 from his review of Free Speech: A Global History from Socrates to Social Media by Jacob Mchangama

"Fix housing regulation and you go along way toward fixing malinvestment."


"Most people don’t understand this process. When they see it play out, they misdiagnose what is actually going on. I see article after article claiming that [central banks like] the US Federal Reserve 'artificially' lowered interest rates, and that this created “malinvestment” into unproductive projects. They claim the problem can be fixed by raising interest rates to a level that imposes discipline on investors, a rate that doesn’t allow for low quality investments to be profitable. That’s wrong.
    "[New Zealand] does have a malinvestment problem, but it’s not at all what many pundits assume. The cause of the malinvestment is zoning and other regulations that make it difficult to build housing. And housing is not just another sector; it’s a key part of investment. These bad regulations push saving into areas that are less productive than housing construction, including marginally productive government and corporate investment.
    "The problem of malinvestment cannot be fixed [just] by having the [Reserve Bank] tweak interest rates; it requires much more fundamental solution. The only way to fix malinvestment is to remove regulations that prevent developers from building what people really want, which is high-quality housing. [Cities like Auckland were transformed in the 1920s when a ring of affordable yet attractive California bungalows were built by profit-seeking speculators at the end of new tram lines. But New Zealand has lost the ambition for such things, and settled instead for three-storey stagnation.]
    "If you ask most people what stands in the way of them having the sort of lifestyle they wish to have, not many will mention a lack of food or clothing. Most have adequate cars and TV sets. Most have a school to send their kid to and some form of health care. Instead, housing is the one area where lots of people are dissatisfied, where dramatic improvements in living standards are still possible. But that requires building new housing in locations close to good jobs. Bandaids such as rent control do not result in a single extra person having housing, and indeed reduce the housing stock in the long run. More housing is the low hanging fruit to raising living standards. Fix housing regulation and you go along way toward fixing malinvestment."
~ Scott Sumner, from his post 'Zoning and 'malinvestment'' [US references have been localised]

 

Wednesday, 25 January 2023

Warm, dry ... and increasingly out of reach

 

A lesson from Scotland for locals here who like to bash landlords in the name of improving things for renters. 

It turns out that private rents in Glasgow are rocketing as landlords, sick of being bashed by the Scottish government's many laws making it harder to be a landlord ( in the name, it's said, of improving things for renters), are simply exiting the market. CityLets, a Glasgow residential letting agency, explained that "legislation was leading to many small landlords selling up." 

The results are, predictably, disastrous for renters. Colin Macmillan, from Glasgow Property Letting, said: 

Whilst the reality of the Scottish Government’s sanctions and actions are filtering through the private rented sector, many traditional landlords have had enough and are exiting the market.
    With an oversubscription of university places, we find ourselves in a perfect storm.
    Fewer properties available with unprecedented demand equals hyper-inflated rents.
    We also find ourselves in a cost of living crisis at probably the worst time of the year, with energy costs rising as the temperature is falling, and subsequent worries that rent arrears may increase also.”
    Those involved in the rented sector said private landlords have become a 'political football'.

One of the measures that would make the the disaster even worse was a rent freeze to come in from April. In what's called "a major u-turn," the Scottish government now propose to replace it with a "cap" on rent increases. Housing minister Patrick Harvey "said the government now accepted a rent freeze would hit landlords too hard." You think?

As Natalie Solent comments

Well, “disastrous” to “bad” is an improvement. But unless and until the Scottish government realises that both rent freezes and rent caps are very nice for tenants already in place but very bad for anyone trying to rent a house or flat from the day they are announced onwards, times will be hard for those seeking to rent in Scotland.

And the same for anywhere else they're threatened.


"The larger meaning of Free Trade..."


"The larger meaning of Free Trade ranks it as a phase in social evolution by which, on the one hand, militarism is displaced by industrialism, and, on the other hand, political limits of nationalism yield place to an effective internationalism based upon identity of commercial interests."
~ J.A. Hobson, from his 1898 article 'Free Trade and Foreign Policy'


Tuesday, 24 January 2023

Co-governance?


"If co-governance denotes a political system in which an indigenous people and the descendants of the settlers who joined them wrestle together with the legacies of colonisation – as free and equal citizens – then we already have it."
~ Chris Trotter, from his post 'What is Co-Governance?'

"It is surprising how much emphasis the Ministry of Education is giving to race as a key variable in education.


"The biggest problems in New Zealand’s schooling system are poor literacy and numeracy... 
    "Given all this, it is surprising how much emphasis the Ministry of Education (MoE) is giving to race as a key variable in education. MoE seems more focused on promoting Māori racial and cultural identity than, for example, professional identities. 'Māori succeeding as Māori' is a recurring trope. A wisely sardonic Māori kuia once said to me that New Zealand has too few Māori in the professions and too many professional Māoris.... This was decades ago, and she spoke in a whisper. By now the prevailing zeitgeist will have silenced her completely."

~ Peter Winslet, from his post 'Science, mātauranga Māori, and the national curriculum'

Monday, 23 January 2023

He's New Zealand's new Prime Minister, by the way.


Being a professional political blogger and all (and by 'professional' here I mean simply 'one who professes to be or do a thing to some degree of efficacy'), and since every other professional commentator is currently going through the 'H' section of their filing cabinets to pad out stories introducing Chris Hipkins to their readers, I thought I'd better examine what I've already written here about the profoundly unexciting young fellow. (He's New Zealand's new Prime Minister, by the way.)

Searching the scrolls here reveals he's caught this blog's eye only five times, which probably says something already.

Oddly, the first time he's mentioned is with a recommendation to vote for the fresh-faced new candidate in his first election. Yes, true story. And yes, there is a catch. (It's down near the end of the post, if you're really interested.)

The next time he catches this blog's attention is 8 years ago as minister of education, defending the teachers' unions. Our Dr McGrath describes the "boyish Labour MP and teacher's pet Chris Hipkins" who "seems convinced that if teachers in charter schools aren't registered, children will be at risk and the sky will fall." The good doctor's recitation of many registered teachers peccadilloes still suggests otherwise. 

As minister of education he also oversaw the introduction in the government's factory schools of new dumbed-down curricula, of course, including in science. Sorry, I mean in climate change, in which New Zealand children are now indoctrinated taught. ("As the post reminds us, "What happens in our schools is a very big part of shaping the future of New Zealand,"as Helen Clark herself crowed back in her day.)

Hipkins first emerged to prominent notice in his role as Minister in charge of Responding to Covid Headlines. As it happens, our own post's headline describes his work well, as compared to that of his colleagues: 'Even 'pretty inept' looks good compared to 'not at all.'

And with our last and most recent reference to this emerging talent, we're going to have to claim some kind of prescience in saying "it seems pretty clear: the most dangerous ministers in the current cabinet are the young and eager Wood and Hipkins, and the older, wiser and more devious Parker, Little, Faafoi and Robertson." (Okay, maybe not Faafoi.)

To be fair, it's not truly insightful analysis. And there is more about him we might have said, including about his time most recently as Minister Oveseeing Ram Raids (a suitable bench-mate then for his deputy, in her role as Minister for Social Mayhem), but he really is so dreadfully unexciting it's hard to say anything much at all. 

How his handlers decide to brighten him up for the electorate will be about the only interesting thing to observe about him in his last few months as Prime Minister -- playing as Geoffrey Palmer to Jacinda's David Lange.


"The fawning over Sepuloni..."


"In the 'NZ Herald' Thomas Coughlan writes: 'Sepuloni ... [is] social development minister and may keep this roll after the reshuffle (she's excelled, so far.' And at RNZ Jane Patterson says: 'Sepuloni has been a steady pair of hands in the social development portfolio'...
    "For starters emergency housing is in the social development portfolio. The take-over of motels leading to social mayhem (think Rotorua) has been a tragedy for those housed in them and those in their surrounds. The waiting list for public housing has sky-rocketed since Sepuloni has been Minister.
    "EVERY main benefit has seen increased numbers since 2017. Covid played a part, but the upward trend was established before 2020.
    "Never before has New Zealand seen demand for both skilled and unskilled labour at current levels yet 11.3 percent (up from 9.7 in 2017) of the working age population is benefit-dependent.
    "Compounding this, the average length of time people are spending dependent has gone up....
    "Her own ministry's annual reports acknowledge the department is not moving in the right direction in a number of areas.
    "Worst of all Sepuloni has overseen a rise in children living in unemployed homes. The damage to their outcomes is well researched and documented. But unheeded by this government whose sole focus has been to lift incomes with their fingers firmly in their ears over the unintended consequences of paying people to do nothing ... except have children.
    "If all of the above is 'excelling' I hate to envisage what failing looks like."
~ Lindsay Mitchell, from her post 'Sepuloni'

"It is sometimes forgotten that New Zealand is a securely post-Enlightenment society..."

 

"It is sometimes forgotten that New Zealand, as a neo-European society, is a securely post-Enlightenment society... a very particular example of post-Enlightenment experimental practice…. The thinkers of the Scottish Enlightenment … [argued] that men were governed by interest if not reason and that those interests could be orchestrated for beneficent purposes….
    “[W] e still live in a world first codified then, a world seen as 'a unified and self-sufficient Nature, governed by orderly laws, and including man within itself as part of Nature'….
    “Such a view underwrote 'the autonomy and sovereignty of knowledge'…. Thereafter the world was to be located and constituted through knowledge….
    “By the last quarter of the nineteenth century economic and moral progress would be widely considered fruits of knowledge. The myth of the Garden of Eden, where knowledge brings the Fall, had been stood on its head.”

 

Sunday, 22 January 2023

"The Case for Open Borders"



What should immigration should look like in a free society? it should look something like this, argues Harry Binswanger: Borders should be open, but defended. Something like the Schengen borders in today's Europe.

People risk their lives every day to flee dire conditions in their home countries to build a new life in New Zealand, Australia, the UK, the USA ... what right do you have to stop them? Shouldn't they be allowed in?
"During his talk at OCON 2022, Dr. Harry Binswanger answered: yes, and without restriction.
    "Dr. Binswanger is aware that his position is radical and controversial. There are many arguments against open borders — from economic to cultural to political. Binswanger addresses the main objections, which he says are based on collectivist premises. But first he grounds his positive argument on the individualist principles of the Declaration of Independence: the unalienable rights to life, liberty and the pursuit of happiness, which are possessed by any individual from any nation. This includes [all and any locals] who wish to trade and engage with immigrants.
    "Binswanger understands, however, that open borders are an ideal for a free society that cannot be achieved overnight. But that shouldn’t deter us, he says, from using that ideal to guide us in the right direction and start implementing certain incremental changes toward that end. He makes some concrete policy suggestions to that end.
In the Q&A portion of the talk, Binswanger addresses questions on topics such as:
 
    * Screening at the border for infectious disease and during times of war;
    * The relevance of the political sympathies of immigrants and whether they should be allowed to vote;
     * The 'overpopulation' objection to immigration.
       "Binswanger closes by relating how, when asked about her position on immigration, Ayn Rand said, 'How could I advocate restricting immigration when I wouldn’t be alive today if our borders were closed?'”

Saturday, 21 January 2023

"Money is not an artefact of the State...money emerges from nature and is used by humanity just like other natural elements and their compounds are used"


"'The Natural Order of Money' offers a complete debunking of the State theory of money by explaining how money is not an artefact of the State or something that is only useful because of enforcement by State power. Money is not a human-made invention outside of the natural order. Because economic activity is based in the first instance on the individual as a producer and consumer regardless of the State or other entities, money emerges from nature and is used by humanity just like other natural elements and their compounds are used – to enable individuals to improve their situation by which standards of living advance.
    "More to the point, money is a unit of weight that in pre-history became a unit of account useful in economic calculation as primitive humans learned that voluntary cooperation through the division of labour helped them to improve their life by better meeting their needs and wants. We learn why gold is natural money, and why only it provides an objective standard to measure progress and bind the wider economy to the real economy so that all economic activity is measured equitably and in conformity with the natural order.
    “'The Natural Order of Money' is a beautifully produced book that fittingly conveys its principal topics – the beauty of nature, humanity’s place within it, and the harmony offered to everyone when abiding with the natural order.

~ James Turk, from his book review of Roy Sebag's The Natural Order of Money


Friday, 20 January 2023

"That was the point about Ardern...." [updated]


"That was the point about Ardern. She wasn’t just Prime Minister of New Zealand – and a popular one at her peak – she was a global pin-up for progressive values [and the opprobrium therefrom, deserved or underserved, from being so- Ed.]. She was the beacon of hope among those on the Left who had been destabilised by Donald Trump, Brexit and Boris Johnson. For many, she was seen as a breed apart among global leaders: one who was untouched by the fatal brew of ego, arrogance and self-interest which they saw as inbred into many male politicians.
    "Ardern’s undoing was in that she appeared to believe that herself. I don’t claim to be able to read her mind, but I would guess that her real reason for resigning ahead of New Zealand’s general election later this year was not primarily that she wanted to collect her daughter from playgroup every day, as she has intimated, but that she could no longer cope with her halo having slipped. When you have been built up into a living saint it must come as a shock to find yourself under attack for failing to address the same old problems which afflict less-progressive national leaders. Inflation, a stuttering economy and rising crime are hardly unique to New Zealand, but they showed that there was nothing magical about Ardern’s politics – the only difference is that in her case she lacked the toughness to weather serious adversity....
    "The danger now is that in resigning before what was beginning to look like an inevitable defeat at the polls, she will come to be seen by progressives as a political martyr, reinforcing their belief in her greatness, as a female leader who willingly gave up power to be with her family. The reality is that she failed in much that she tried to achieve, and the hero-worship which she enjoyed around the world made things worse by adding to her hubris."
~ Ross Clark, writing in the UK Telegraph

OTHER COMMENTARY:
"Surely no politician has burnt through more political capital in as fast a time as Jacinda Ardern. Winning her second election in a landslide in Oct 2020, she resigns in January 2023. There was simply no more political capital left in the tank.
"Was Ardern’s position left untenable due to a failed cabinet reshuffle that was rebuffed by her colleagues? And what will the change of leader mean for the flagship policies which Labour decides to continue to support in 2023?"
          'No Political Capital Left' - HOMEPADDOCK
"The progressive Left outside NZ love her, but that’s because they have literally no idea of her policies. [Any more than do the offshore right who criticise her ... - Ed.]
    "Her government was rabidly anti-immigration, right from the start. It depresses workers’ wages see. So NZ, which is structurally geared for immigration, is now desperately short of masses of key workers. Old school Socialist, not progressive at all.
    "Her government was rabidly centrist, [literally], though it took some time to become apparent. It started to recentralise things that have long been decentralised in NZ. Old school Socialist, not progressive at all. It tended to be badly done, and wildly unpopular — Kiwis aren’t really into centralisation.
    "Finally, and incredibly for a country used to non-unionised workplaces, Jacinda tried to return to central bargaining.
    "It’s hard to find a progressive policy.
    "Abortion was legalised, but no-one had been prosecuted under the old legislation, so that was an easy win. It literally changed nothing.
    "She tried to legalise marijuana, but her proposed system was like the Canadian one, bound by so many restrictions that the illegal trade would have continued...."
          ~ Chester Draws at Samizdata
"So credit to the PM for realising that despite having more time left than most world leaders, she was not going to realise her cherished goals for New Zealand.
    "What might send a shiver down the spine of some older and more time-limited world leaders (as well as her own successor) is that her problems – even if rhetorically more polished – are quite similar to their own.
    "And seem equally intractable.
    "Just run through a list of potential policy-reality clashes: ending relative poverty when statistically poor people show little desire to model your own sensible behaviour; reducing carbon consumption without confronting the truly enormous welfare costs; paying for more health and social welfare without robust long-term market-led productivity growth; building affordable houses without substantial environmental modification and painful disruption to ossified local practice; increasing opportunity and outcomes for indigenous people without creating privilege and double standards.
    "One can speculate that Ardern’s relative youthfulness and sense of greater opportunities to come has made it easier to choose the early transition to minor international celebrity over the responsibility of exercising authority – let alone the risk of losing it.
    "Whatever your political views, you have to feel sorry for her successor.... Barring an economic miracle, it will be hard ... to slip out from under the burden of Ardern’s policy indecision....
    "Meanwhile, the world’s leaders will be asking themselves if Jacinda has made a wise move in beating them to an early shower.
          'PM Makes NZ a World Leader' - POINT OF ORDER
"The rise of Saint Jacinda reflect[ed] the triumph of paternalism. Among our supposedly liberal elites it has become common sense that populations must be controlled for their own good; that a measure of how much a leader cares is how brutally she cracks down on ideas or behaviours she deems dangerous.
    "We almost certainly haven’t seen the last of Ardern. No doubt a plum job at the United Nations, the World Health Organisation or some other ghastly supranational body beckons. Nor have we seen the last of the elitist politics that she came to represent. It’s high time we had a reckoning with this ‘kindly’ authoritarianism."
          'Good Riddance to Saint Jacinda' - Tom Slater, SPIKED ONLINE
"When Jacinda allowed herself to be guided by her heart her decisions were politically faultless. It was only when she ignored her instincts and followed her head that the poor decisions began to multiply.
"She never appeared to grasp that announcing policy is not the same as implementing it. Press releases do not build houses. Speeches do not end poverty. In the end, it was Jacinda's constant failure to deliver that made it impossible for her to go on.
If you say 'Let's do this!,' then, Dear God, you have to do it!
          'Jacinda Resigns' - Chris Trotter, BOWALLEY ROAD

Thursday, 19 January 2023

Vale historian Paul Johnson, (1928-2023)

 

Source: Daily Telegraph

I'm disappointed this morning to hear that historian Paul Johnson has died -- aged 94, it seems!

I haven't read him for a while, but I did, many years ago. In some ways he provided my introduction to a lot of 19th and 20th century history through his two books Birth of the Modern, and Modern Times, which is still a masterful account of the post-colonial independence movements around the post-WWII-world. I still reflect occasionally on his comment in the latter that New Zealand represents a lonely beacon with a unique respect for individual human lives.

He wrote well, and broadly -- both things rare these days in a historian.  Those two books above remain my two favourites of his. 

Others I rate would be his A History of the American People (he rates the creation of the United States, with only slight hyperbole, as "the greatest of all human adventures" -- "no other national story holds so many tremendous lessons," he says) -- and Intellectuals: From Marx and Tolstoy to Sartre & Chomsky, in which he "revels in the wickedness" of so many who have shaped history for the worst. None emerge well. It's less an attack on their ideas than on the distance between their ideas and their private lives. Of Marx, for example, he reveals that he never went near a factory in his life, that many of the most lubricious 'facts' related in Das Kapital were from long-out-of-date government reports scarcely reflective of contemporary working conditions, and that maybe the only exploited labourer he every knew personally was his maid -- whom he impregnated, forcing the child into an orphanage, and never paid her a cent for her work.

He visited New Zealand in 1995, at the invitation of the Business Roundtable, and you can still read the talks he delivered here. One topic seems especially relevant today...

As an author, he was prolific. He was reputed to write in a small study in his house, a "writing machine" lined with book shelves all within arm's reach, which he pre-loaded with pre-prepared file cards (see pic above) and all the books necessary for his forthcoming tome. I've tried that too. It takes a lot of books!

"His stream of books was almost torrential," writes Theodore Dalrymple in his obituary of the man. "Perhaps his biggest and most influential one was Modern Times: The World from the Twenties to the Eighties(1983)."
"What Johnson called 'gangster despots' came to dominate the history of the first half of the twentieth century, and he was scarcely more flattering about the self-proclaimed liberators of the second half. Even those who did not altogether approve of, or share, his historical outlook admitted that this book was a tour de force. 'Modern Times' influenced a generation of American conservatives....
    "Johnson liked nothing more than to infuriate by means of iconoclastic polemic. His book 'Intellectuals' (1988) provided potted biographies of such revered figures as Rousseau, Marx, and Tolstoy, demonstrating what rotters they all were in their personal lives. This was not exactly an exercise in scientific method, but it was good fun and gave pleasure to those who distrust intellectual gurus. It also gave rise to insinuations that Johnson himself did not always quite live up to the moral ideals that he so fiercely propounded in public.
    "He coined striking phrases—Hitler’s views, for example, were 'the syphilis of antisemitism in its tertiary phase'—and he could never be accused of mealy-mouthedness. His views, though somewhat changeable, were expressed with vigour approaching dogmatism, though they were always well-informed. You knew where you stood with him.
    "It is customary to say of remarkable men that we shall not see their like again. Whatever may be the case with other remarkable men, this is likely to be true of Paul Johnson. It is unlikely that anyone will tackle so huge a range of subjects again with such knowledge and verve."

Johnson is somewhat of a litmus test for contemporary times. Without changing his own views substantially -- he was, and remained, an individualist -- he was first seen as a proud and leading member of Britain's intellectual left (he as editor for a time of the New Statesman) and then as a Thatcherite; in the US he was enthusiastically embraced by a generation of conservatives (as Dalrymple relates above), then dropped for being too "challenging."

For one thing, his conservatism was unmistakably 'Thatcherite' and had free market undertones, which are less popular now than they used to be. For another, Johnson was a polemicist but his books (and his understanding of history) are rich with nuances. And that doesn’t go very well with the Zeitgeist, left or right.
This says more, of course, about the changing periods through which he lived and wrote, than it does about Johnson himself. A fact the great historian would no doubt have found fascinating.