Friday, 11 March 2011

Friday Morning Ramble: Are we recovering?

It’s a long haul to recovery. Post-earthquake, post-economic bust, and post-political oblivion. How has everyone been doing this week?

  • Danyl has a great idea to put  John Minto, Chris Trotter and Keith Locke to work. 
    The dependency trap –  D I M   P O S T
  • Alan Bollard demonstrates he’s never read the Broken Window Fallacy, or learned anything about booms and busts:
    Rebuilding Christchurch will create conditions similar to the building boom between 2002 and 2007, Reserve Bank governor Alan Bollard says.” [hat tip Berend]
    Building boom 'will help economy' – N Z  H E R A L D
  • OliverCooper sums up why Alan Bollard and other central bankers are getting paid the big bread: Interest rates are kept at 0.5%. Price inflation, in case you forgot, is at least 5%. So you're PAID 4.5% to borrow money. No wonder we do so recklessly...
  • What rights to unions have? “People have the right to associate freely, but no right to force their conditions on others.”
    Guarantee to Unions the Same Rights the Rest of Us Have – Ari Armstrong,  F R E E  C O L O R A D O
  • Bar-owners are outraged that competition from supermarkets has forced them to cut their prices and offer a better deal to consumers. If you’re worried about the shrinking profits of bar owners in New Zealand, Rauparaha recommends you head on down to a bar and make a donation tonight.
    There are others who need your generosity – V I S I B L E   H A N D
  • What do you get when a former Minister of Energy writes to the chairman of the panel reviewing Nick Smith’s Emissions Tax Scam? A surprising amount of good sense, actually.
    NZ ETS review under way – C L I M A T E  C O N V E R S A T I O N   G R O U P
  • The principle of non-initiation of physical force (sometimes called the non-aggression principle) is at the bottom of any rational politics.  But what ideas underpins the principle?
    Reduction of “the Initiation of Physical Force is Evil” – Roderick Fitts,  I N D U C T I V E  Q U E S T
  • Yaron Brook comments on Abraham Lincoln’s legacy at the 150th anniversary of his inauguration.
    President Lincoln, 150 Years Later – P J T V
  • “The literature that recounts the evils of the political/theological ideology of Islam is vast, growing, and informative. Unfortunately much of it is wrongly premised and written by individuals of a religious bent who have yet to check their premises. They really have no reason to cast the first stone at Islam, when the stones thrown at them share a striking similarity to the stones they hurl back.”
    Mosques vs. Churches vs. Freedom - Edward Cline, R U L E  O F   R E A S O N
  • What happens when an anti-jihadist cartoonist (and former Muslim) meets Jon Stewarts’s Daily Show? Does insight ensue? Or hilarity? Or just some very neat editing?
    Don't Judge a Comic Book by its creator's appearance on The Daily Show – B O S C H  F A W S T I N
    Batman’s Muslim Sidekick – D A I L Y  S H O W

Killian on OX news with Bo Reilly Source Bosch Fawstin

  • “New Senator Randall Paul is championing economic freedom while at the same time championing the morality that prevents it from existing.”
    Senator Rand Paul’s Morality and the Welfare State
    – Joshua Lipana,  C A P I T A L I S M  M A G A Z I N E
  • What you would have made if you had bought Apple stock instead of Apple products [hat tip Geek Press]
    Had You Bought Apple Shares Instead Of Apple Products… – M O N E Y   C O N E
  • Cartoonist Jon Cox keeps spotting his cartoons all round the Middle East, especially in nearly every street protest.
    Gadhafi Caricature Gets Around – J O H N  C O X  A R T
  • Has globalisation caused food riots in the Middle East and elsewhere?  No, says Don Boudreaux. “The people who today are hungry and starving are not those of us living in globalized, liberal economies; it is, rather, the poor souls cursed with the misfortune of living in countries whose governments follow the advice of the [anti-globalists] and ‘protect’ their citizens from ‘global economic liberalization’.”
    Food, Famine & Globalisation – Don Boudreaux, C A F E   H A Y E K
  • Andrew Schiff is the coauthor, with his brother, Peter Schiff, of the great introduction to economics How an Economy Grows and Why it Crashes. And he’s pretty smart too.
    An Interview with Andrew Schiff about Fishing Nets, Hut Gluts, and other Economic Matters 
    – O B J E C T I V E  S T A N D A R D
  • Events in the Middle East have made it abundantly clear—or should have—that If policymakers want to maintain food security they had better reconsider the arguments behind inflationism.
     Inflationism and Social Unrest – E C O N O M I C   P O L I C Y  J O U R N A L
  • America has a huge government debt crisis. How big? Take a look…

  • PS: You can get the graph Duquesne University economics professor Antony Davies uses in his presentation at his website.
  • So with a debt like that, is a crash inevitable? Find out…
    The Powell History "Crash Course" on the Coming Crash! – P O W E L L  H I S T O R Y
  • Don Boudreaux demonstrates how to debunk the Balance of Trade Fallacy in 200 words or less.
    Protectionists are to economics what astrologers are to astrophysics – C A F E   H A Y E K
  • Amazon have dropped the price on new book The Price of Everything. Some wags have suggested the author of The Price of Everything did not understand the price of his own book. The author responds, leading to this neat headline...
    The Price of the Price of Everything – Russ Roberts,  C A F E  H A Y E K
  • Here’s a lecture by Frederic Sautet to savour over the weekend on the Austrian school of economic thought (for all of you  who have been asking about it).

Austrians and Other Schools of Economic Thought from FEE on Vimeo.

Cheers, and have a good weekend.

Thursday, 10 March 2011

Lifting man to the heavens…

This morning was the Space Shuttle Discovery touched down for the last time [VIDEO], the longest-serving and most-travelled winged spaceship ever. 

There are problems with government space exploration:

As the grandest of man's technological advancements, requires the kind of bold innovation possible only to minds left free to pursue the best of their creative thinking and judgment. Yet, by funding the space program through taxation, we necessarily place it at the mercy of bureaucratic whim. The results are written all over the past twenty years of NASA's history: the space program is a political animal, marked by shifting, inconsistent, and ill-defined goals.

And yet, we have seen a great human achievement.

It was other vehicles that first made space a place that man could visit. It was these Shuttles, allowing an easy return journey, that allowed men and women to begin the process by which man first began making a home there.

As the workhorse in that fleet retires, it’s a good time to celebrate that.


PS: the source of this picture is the blog Temple of the Human Spirit.
If celebrating human achievement is your passion, you should give it a regular visit.

Wednesday, 9 March 2011

Saffire Resort, Tasmania, by Circa Architecture



A resort complex in Tasmania (yes, Tasmania) superbly integrated with the vista at its site by Circa Architecture---making a destination of a location that would otherwise be overlooked.

More pictures, and plans, at the ArchDaily site. [Hat tip In the Name of Good Architecture]



Government profiteering on somebody else’s airwaves

The Government appears to have agreed to a deal to help bail out media company MediaWorks, reports the Royal NZ Herald.

_Quote MediaWorks’ latest accounts [says the Herald] show it has essentially received a $43.3 million loan from the Crown to enable it to renew its radio broadcasting licences for the next 20 years.

Except Media Works hasn’t received a loan from the Government at all. What it has received is an agreement to defer payment for the use of the Government’s radio airwaves for the next twenty years—for which the Government is charging MediaWorks $43.3 million plus penalties of 11.3%.

It’s nonetheless objected by commentators that this is capitalism. Or even crony capitalism. Or just regular old corruption with a bailout of the government's mates.

Frankly, this sounds like children talking. Because not one of the commentators on any side of the aisle has bothered to challenge the most absurd part of this story: that the government owns the airwaves in New Zealand, and not the private broadcasters—and that it charges the broadcasters handsomely for the “privilege” it grants them for using this nationalised property.

Something that is frankly as absurd with airwaves as it is with foreshore and seabed.

As if that sort of setup was capitalism.

Or right.

Yet virtually every commentator takes it for granted that airwaves (and seabeds) are "public." But they shouldn't be. And curiously, none of them sees the connection with the foreshore and seabed debate. But they should.

Alex Epstein from the Ayn Rand Center makes the case that airwaves (and by extension all natural resources) should be private property.

Sure, while the airwaves themselves have always existed in nature, the broadcast technology that gives them value did not. It’s here that property status properly begins.

_QuoteWhen inventors and engineers first unlocked nature's potential to carry radio waves, and entrepreneurs began developing the commercial value of radio, the government had a responsibility to define property rights in this sphere--so that these innovators could own and utilize portions of the spectrum without interference by others.

But instead of defining property rights, the government usurped them.

_QuoteThere is an exact parallel here to property rights over [foreshore, seabed, and] newly available land. When the American frontier was opened in the 19th century, the government did not declare it public property. Rather, it parceled out the unowned land on a first-come, first-served basis, and then recognized a property right for those who made use of the land for five years. The same type of procedure—enabling pioneers to earn a property right to that which they render valuable--applies to any newly usable portion of spectrum.

Or should.

_QuoteAnd, like land rights, once a property right to the use of a given frequency band in a given region is earned, it belongs to the owner unconditionally...

Meaning, among other things, that it doesn’t need to go cap in hand to its master every year pleading for another license—something some governments have oft-times used to shut down stations that criticise them too harshly.

_QuoteUnfortunately, our government does not recognize airwaves as private property, and never has. In the 1920s, its response to the development of radio was not to define and protect property rights for the field's creators, but to nationalize them as "public property." Consider the injustice of this: the pioneers who envisioned the potential of radio technology, and took the risk of bringing it about, had no more right to their creation than we do, who created nothing.
    Under the "public" airwaves regime, businesses do not own but merely "license" portions of spectrum--which the government has total authority to control in the "public interest." The use of spectrum is determined, not by the business that has purchased and earned it, but by the [grey ones]--by whatever it feels is in the indefinable "public interest." In the realm of media, … bureaucrats can effectively censor viewpoints they dislike by revoking broadcast licenses or imposing huge fines. In the realm of wireless data, [bureaucrats and Government] can impose more onerous terms on a paying licensee anytime they wish--such as Google's proposal that licensees be forced to sell large portions of their bandwidth to competitors at FCC-dictated "reasonable" rates, no matter what it does to their business…
    [We] need to start recognizing airwaves as the private property they really are…

Yes. We do.

DOWN TO THE DOCTOR’S: In praise of gas guzzlers [updated]

_McGRathLibertarianz leader Dr Richard McGrath invites you down to his clinic for an inoculation against this week’s stories and headlines on issues affecting our freedom.

This week: In praise of gas guzzlers.

THE DOCTOR SAYS: Firstly, let’s not forget we’ve had a blowout in the money and credit supply of 8% since that record petrol price in July 2008, so the “record price”—adjusted for the inflationary policies of Labour and National governments—is actually $2.33 in today’s fiat currency. So don’t get your panties in a lather just yet.
    There’s also no need to go out and buy a scooter, or other form of two-wheeled transportation. One of my surgical colleagues refers to motorcycles as the fast track to a bed in the orthopaedic ward of your local hospital.  A donor cycle, if you will. If you’re confident on a motorbike then go for it, and good luck to you, but a lot of inexperienced motorists turning to scooters for the first time will suffer injury and lose time from work as a result of slipping over in the rain, skidding on ice and being shunted by bigger vehicles that don’t see them. Witness the huge ACC levies on motorbikes. There must be a reason for that, eh?
    Hybrid vehicles are an expensive gesture with no savings in fuel costs if you drive them on the motorway (unless you love driving in gridlock at rush hour).
    Diesels are noisy, cost more in maintenance and road user charges than petrol vehicles, and aren’t economical unless you do big mileage. I was the owner of a diesel vehicle for eighteen months. Last month I sold it, as I had reservations about the long term durability of the (French) diesel engine.
    I am now the proud owner of a gas-guzzling V8—a 1995 ex-Singapore Lexus LS400 that cost me just $8,000 by the time I had some work done on the body. I don’t need to tell you that the engineering standards and refinement of these vehicles are top-notch. But this vehicle is cheaper to run than my Suzuki Vitara 1.9 litre turbodiesel!
    When you factor in depreciation, interest on money invested in the vehicles, fuel costs, road user charges, maintenance costs, registration and obtaining warrants of fitness, the Lexus will be a thousand dollars cheaper to run this year than the Suzuki. (And that’s without adding in the cost of sorting the starter motor in the Suzuki when it broke down while on holiday in Taupo last year.)
    If you want a tidy looking V8 Lexus, officially a Toyota Celsior (which is how Lexus vehicles were originally sold in Japan), you could do a lot worse than clicking here.
    So don’t let events in the Middle East and the Greenwash about peak oil panic you into buying dangerous or expensive vehicles – splash out on a safe, luxurious and beautifully crafted second-hand Lexus. Large-engined Nissans, Mitsubishis, Toyotas or Hondas are even cheaper. With petrol prices as they now are it’s a buyer’s market, and these vehicles are so cheap!

  • DOMPOST: ‘80% rate rises in quest for fairness’Rural ratepayers could be stung with massive
    usurious rises in property taxes…

THE DOCTOR SAYS: As mentioned in a recent column, the late conservative American commentator William F Buckley once opined that anyone who used the word ‘fair’ in conjunction with income tax should be electrocuted. The same should apply to other taxes.
     In defence of the Carterton District Council however (a phrase I very rarely use) it appears a lot of money they extracted from property owners (via threats of physical retaliation) is being spent on roading in the countryside, with urban ratepayers effectively subsidising rural ones.
    I have a solution: user pays.
    Gift the roads to those who live on them using any title system you like, and make the owners responsible for their upkeep.
    Allow electronic tolling to maintain the necessary funding.
    Allow the road-owners to build (or allow) roadside retail and the like to bring in customers.
    Maintenance would be contracted out as it is now. Administrators would be accountable to shareholders. Heavy vehicles that mince up road surfaces could be charged accordingly.
    If you’re a member of the Green Party, you should support such a move, as surely this would discourage people from making unnecessary trips in their motor vehicles. Best of all, it would stop the Carterton District Council from clipping the ticket on the way in order to feed the bureaucratic ant-farm in Holloway Street.  

That’s all for now.
See you next week!
Doc McGrath

Those who expect to reap the blessings of liberty
must undergo the fatigues of supporting it.

-Thomas Paine

UPDATE 1: To put the “record price” for oil in context, reader Dinther sent me a graph based on these figures measuring the cost of a barrel of oil since that 2008 high (or very near it) measured against an ounce of gold (an ounce of gold rising roughly reciprocally to future expectations of price inflation).Oil-Gold Instructive, don’t you think?

Fuel prices, and how the politicians can fix them [update 2]

2999I've got to make a couple of small points about petrol.  About increased global demand, a sinking US dollar, and the unrest in the Middle East between them causing rising petrol prices here, and about alleged economists here claiming rising petrol prices will cause "inflation."

First, there’s nothing we can do here about rising global demand the sinking US dollar or the unrest in the Middle East. But there is something that can be done here about rising petrol prices, and by those very politicians crying crocodile tears about them. Those thieving bastards could bring them down in a stroke. In a moment. In a heartbeat. Because in one simple move taking less than an hour they could take off/reduce/put a cap on all those ACC Levies, Excise Taxes, Emissions Tax Scam taxes and GST on petrol that rake in billions of dollars every year for the government—extortions that between them make up more than half the price you pay for petrol at the pump.

Think about that next time you hear politicians saying meekly “there’s nothing we can do.”


Second, I’ve got something to say about all those alleged economists who claim rising petrol prices will cause "inflation." Alleged economists like (to pick on one at random) Bank of New Zealand economist Doug Steel, who says “the increase in petrol prices, if it stayed at the current level, would directly add 0.5 per cent to [price] inflation in the first quarter of 2011.” I’ve got one word for Nick and his like-thinking colleagues, and it’s this: Bullshit.

3018 Price inflation, if you’ll recall, is a situation in which we experience generally rising prices, virtually across the board, on everything in the basket. And the argument usually made by Doug and his other unthinking baskets is that because fuel prices feed into virtually every other price in the book, so rising fuel prices will be responsible for rising prices across the whole basket.

This argument holds a certain amount of water.

If you don’t think about it too much. 

Or at all. 

Because as everybody knows who runs any kind of budget, if the price of X goes up so you spend more on X then that means you have less to spend on Y and Z and everything else in your basket—and when that happens across a whole economy the prices of Y and Z will tend to go down

The ups and downs balance out. They have to, because there’s only so much money in the whole economyAnd if more of that money is being spent on one thing (because its price is going up and its needed) then there’s less money to be spent elsewhere on things that aren’t needed so much, and so the prices for these things must diminish commensurately.

So the idea that rising petrol prices cause generally rising prices is a bust. It has to be—as long as the amount of money in the system stays the same.

Frank Shostak explains the process better than I could:

_Quote If the price of oil goes up, and if people continue to use the same amount of oil as before, people will be forced to allocate more money to oil. If people's money stock remains unchanged, less money is available for other goods and services, all other things being equal. This of course implies that the average price of other goods and services must come down. Remember: a price is the sum of money paid for a unit of a good. (The term "average" is used here in conceptual form. We are well aware that such an average cannot be computed.) Note that the overall money spent on goods doesn't change; only the composition of spending has altered, with more on oil and less on other goods. Hence the average price of goods or money per unit of good remains unchanged.

It's so obvious, even a central banker should be able to see it. A rise in the price of one, or several commodities, will certainly have an effect on how people spend their money, and what they spend it on, but it can have no effect at all on overall prices across the board. It can't.

There are many ways that the prices of one commodity can rise. But there’s only one way that generally rising prices can occur—one thing that can have an effect on the general price level, something that (unlike petrol) actually does touches every single thing that is supplied, demanded and for which a price is charged—something that touches every thing in every market.

I speak, if you haven’t guessed, about money, and the rate of increase of the money supply.

Because (as everybody on a budget would already know) only if you make more money is it possible for you to keep buying the same amount of Y and Z while the price of X goes up.  Explains Shostak,

_Quote...the rate of increase in the prices of goods and services in general is going to be constrained by the rate of growth of money supply, all other things being equal, and not by the rate of growth of the price of oil. It is not possible for increases in the price of oil to set in motion a general increase in the prices of goods and services without corresponding support from the money supply... The key then for general increases in prices, which is labeled by popular thinking as inflation, is increases in the money supply, e.g., the supply of US dollars.

As Milton Friedman used to say, “Inflation is always and everywhere a monetary phenomenon.” 

To put it another way, it is the monetary inflation of the central bankers that is always and everywhere responsible for price inflation, not the rising price of petrol.

And far from being impotent to act, this is something Mr Bollard and his colleagues can very much do something about. After all, it's they who are responsible. The culpability for monetary inflation lies wholly with them—and with the flawed economic thinking that put them in positions of monetary power.

UPDATE 1:  As energy costs surge and food prices touch record highs the world’s leading central bankers have emerged form a meeting vowing to fight inflation – by which is meant they vow to print money so slowly that few will notice.  All except one. Every major central bank besides the US Federal Reserve is beginning to raise interest rates to “fight inflation” (and encourage savings), but “The Fed” continues to lower interest rates and print money like there's no tomorrow.

The Fed is the only major central bank that can export its inflation, because it is still the global reserve currency. It is still the currency in which oil prices are denominated. For the moment.

Because once everyone realises The Fed is just exporting its monetary inflation, how long before America gets flooded with unwanted Fed notes from around the globe?

[Hat tip IbLvMcgmftJMK]

UPDATE 2: Alvaro Vargas Llosa reckons rising world price inflation means that bond holders will be pushing up world interest rates anyway, whatever the world’s central bankers decide to try to do with them.

_QuoteReaders might remember that from time to time, I fret about the danger of price inflation due to the frenetic printing of money going on in the world. As a survivor of hyperinflation (Peru, 1980s), I suppose you can’t blame me. In any case, symptoms of price inflation have begun to pop up in many countries.
The consumer price index in Britain has officially reached 3.7 percent but many observers think the real figure is above 4 percent, double what the government had forecast. In Europe in general, the annual inflation figure has surpassed what the European Central Bank had targeted. Not to speak of China, where it is almost 5 percent and rising.
Bill Gross, who manages the world’s largest bond fund for investment advisers Pimco and whose job is essentially to find debt securities whose yields beat inflation, put it succinctly: “Why would you want to be a bondholder with bond yields so low and that sort of inflationary trend?” Bond investors are simply waiting for a big rise in inflation followed by significant interest rate hikes.

Read on here. [Hat tip NZBR]

Tuesday, 8 March 2011

ECONOMICS FOR REAL PEOPLE: The Parable of the Broken Window

My friends at the Auckland Uni Economics Group have started up again this year, and they’ve invited me to speak to them tonight about the most prevalent fallacy in economics, one made only more topical by the Christchurch earthquake: The Broken Window Fallacy.

Why not come along?


110,000 Christchurch home-owners need the grey ones to get the hell out of the way [updated]

Builders say it is vital that rebuilding in Christchurch begins immediately.  Christchurch will never rebuild this decade if all reconstruction must wait for council assessors, council inspectors, and all builders must sit on their hands while they wait for the council’s monopoly builder-of-choice, Fletcher Building, to give them a ring.

Why should the productive have to wait for the unproductive in order to get permission to produce their own rebuilding programme?  Christchurch builders are already raring to go, and around 110,000 Christchurch home-owners need to them to.

That’s a lot of work to be done. And a lot of builders and home-owners will want to get going.

Instead they have to sit and wait—and even when they’re ready to get going they’ll still have to sit and wait: Wait for council inspectors and council planners to go through the time consuming process of considering whether enough paperwork has been supplied by hard-pressed applicants before they deign to allow a Building Consent or a Resource Consent to be granted. (Not to mention the time and expense and wasted resources in producing all that paperwork, which in quantity alone is orders of magnitude more than it was even ten years ago.)

But Minister Brownlee could change the situation in a stroke with no diminution at all of building quality. And in Christchurch he has the power to do it:

  • Immediately release land on the city fringe to allow affordable housing and temporary housing to accommodate those 10,000 home-owners,and show them the council means business in helping them.
  • BUILDING CONSENTS: a proposal already exists in the Department of Building and Housing to take work off hard-pressed council building inspectors (and risk from Christchurch ratepayers) and make use of the expertise of the building and insurance industries instead.
    Insurers would study the plans, issue their own consents, and indemnify the builder for any problems that occur. And if a problem did occur, the insurer would deal with the homeowner and fix the problem—without sticking their hand in the ratepayers’ pocket.
    All the council would do would be to identify where the house would go, how high and wide it would be, and what services would hook up to it (or what on-site provisions would be built).
    And the average $15,000 per new house currently spent in council inspections and applications (not to the mention the time involved) would be spent much more efficiently than it is now.
  • RESOURCE CONSENTS: Instead of the present process that will see town planners holding up home-owners for months (a process that would test the patience of Sisyphus and the money bags of Croesus), council (or Brownlee) could set up “Small Consents Tribunals” for all work requiring Resource Consents valued at less than, say, $400,000. Tribunals that would be as informal and efficient as Disputes Tribunals, able to issue a decision immediately based on simple “no bullshit” principles.
    It would be very easy to get this ball rolling.
    First, enact a codification of basic common law principles such as the Coming to the Nuisance Doctrine and rights to light and air and the like.
    Second, register on all land titles (as voluntary restrictive covenants) the basic “no bullshit” provisions of District Plans (stuff like height-to-boundary rules, density requirements and the like).
    The Consents Tribunals would consider your small project on the basis of the codified common law principles and the voluntary restrictive covenants on your title, and home-owners should be able to reach agreement in an afternoon.

The Christchurch earthquake is unprecedented. It’s a $20 billion earthquake in a city of just 400,000 people—and unprecedentedly small number people to bear such a problems.

It’s been said often enough that the Christchurch earthquake is a “game changer.” So let’s see some of the game being changed, and have the grey ones help people rebuild instead of hinder them.

There are around 110,000 Christchurch home-owners who need things to change. And soon.

UPDATE:  High-profile Christchurch business-owner Antony Gough is heading up a group of central-city business- and property-owners who want access to their buildings and a say in what happens to them. The way things are going now, he says this morning in The Press, politicians and search-and-rescue are enjoying full and unfettered access to the whole central city while central city property-owners are still excluded.

_QuoteIf you’re a politician from Wellington … you go wherever you want. If you’re a search and rescue or someone from overseas the town’s your oyster… [but] if you’re one of those dirty capitalists who actually own the property or or a shopkeeper or an office person, don’t you come near it or we will put you in jail if you’re seen in town.
    That’s the wrong attitude because it won’t be search and rescue who
put the city back together.

If this continues, he says “there’s a real risk we’ll get flight from the city”—with Christchurch capitalists leading the stampede to the exits—“and it will never come back.”

These are the people who will put the city together again. If they get some certainty and the shackles come off.

There is now a shortfall of around 435,000 square metres of office space in the central area, and Gough and his groups suggest council can do three things immediately that will get the rebuild under way—relaxing things that they presently prohibit:

  • allow the consolidation of land titles to make better use of land and allow economies of scale to be enjoyed;
  • relax development rules on carparking that take resources away from creating new useable space and accommodation;
  • “development contributions” should be removed immediately from new residential and commercial projects to make them cheaper

That’s the right attitude.

[Thanks Warwick D. for the story]

(Some) School Choice happening in Christchurch

Despite their lofty ideas of always being up to the minute (with teaching philosophies changing by the week, by order of whatever latest pedagogical philosophy goes floating by the Ministry of Education), in many respects New Zealand’s schools are still thoroughly nineteenth century.

No more so than in the hours that the state’s factory schools open—education must only happen between the mandated statutory hours! Never mind all the logistical problems and inefficiencies that creates.

But as many people have been saying, the Christchurch earthquake has been a game changer—even in education—with at least two schools now doing what in businesses would be the equivalent of “hot desking.”

Good news out of bad.

Christchurch Boys High is not badly damaged and is discussing sharing their facilities with Shirley Boys High—one school functioning in the morning and one in the afternoon.  Simple.

Isn't it wonderful how creative alternatives can happen if people are left to solve their own problems?

Imagine if this sort of thing were to happen more often.

Imagine the excitement amongst teachers who may now be able to choose the early or the late school hours, to work—or be able to work full time jobs for two different schools.

Think of the huge savings in school construction by using existing facilities more efficiently, for more hours of the day.

Think of the huge savings in financial, emotional and "environmental" terms of halving the pressure on transport that is currently caused by all schools operating at the same (statutory) times. 

Think of the whole variety of businesses who follow the lead and discover they can offer all manner of more flexible employment options themselves in terms of job sharing and the like. 

Freedom to choose - what a novelty!

And who knows, if “this sort of thing” were allowed to continue, we might even see some taxpayers dollars trapped in the Ministry’s bricks and mortar being released—or at least used much more efficiently.

[Thanks to reader Shirley R. for the story]

Friday, 4 March 2011

GUEST POST: B-Schools and C-Students

Many students embarked this week on the grand adventure of their university years, many of them eagerly setting out on the adventure of business school. Not to bring them all down, but business school graduate Vedran Vuk (author of the Casey Daily Dispatch) explains in this Guest Post why the grand adventure of business school isn’t necessarily all it’s cracked up to be.

In my daily missives here at the Casey Daily Dispatch, I’ve often demeaned students of political science, philosophy, and other less career-oriented majors, but to be fair, today I want to turn the tables on my own academic background, business.

In my opinion, business degrees aren’t necessarily a good choice. It really depends on what one does with them. Careers can range from CEO to assistant manager at the local McDonald’s. Business degrees don’t guarantee results like medicine or nursing; however, they should be applauded for their versatility. Many of my former classmates entered into companies that they never could have imagined.

But there are certainly negative aspects to both the standard business curriculum and the students who study it. So I’ve created a list of several common problems:

  1. Lack of Entrepreneurship – A business school education does little to prepare students for entrepreneurial activities, and very few students go on to become entrepreneurs. The dream job of most business students appears to be a comfortable position inside a major corporation with a salary of $100K. For a field that’s based on risk, creativity and entrepreneurship, there are surprisingly few willing to make the entrepreneurial leap.
  2. A Focus on Corporations – Not only are business students not particularly entrepreneurial, but they are also pushed toward large corporations during the whole education process. For example, accounting and financial valuation are always taught with gigantic corporations in mind. But in a way, this is pointless. Unless a student becomes a professional equity analyst, they will likely never find an undervalued company in their lifetimes.
    However, the chances of discovering an undervalued apartment building in your hometown are fairly good. Or the chance of finding an undervalued small business in need of venture capital is much more likely. Unfortunately, the curriculum is almost always geared toward evaluating ExxonMobil rather than evaluating Joe’s Bakery down the street. The latter would be much more useful for most students interested in profit opportunities.
  3. Lazy and Mediocre Students – You know the saying about companies being run by C students. Well, it really is true; one reason being that the best and brightest don’t end up in business schools. Essentially, most business students are interested in making money. So they clearly didn’t choose philosophy, art history or political science. But they also didn’t choose engineering, profitable science sectors, technology or the medical field. Hence, many want money, but don’t want to study anything difficult. Of course, some just really enjoy the business world. Nonetheless, business classrooms aren’t the place to find the brightest students on a college campus.
    Because of this factor, there is even a vast difference within a business school. The finance, economics and accounting majors are often noticeably different from the others. Many business students are scared to death of any intensive coursework. There’s always extra space in the accounting, econometrics and financial modeling electives.
  4. A Lack of Passion and the Hustle – As noted above, the vast majority of students aren’t interested in becoming experts in their field. Most focus their efforts on hustling and networking to find a corporate job. When a presentation from a prospective employer comes to campus, the same students who never ask a single question in class are suddenly the most curious students in the Q&A sessions. Furthermore, almost everyone wants the hot stock tip; few want to learn statistics to find market distortions. 
    Of course book smarts aren’t everything. But if you aren’t entrepreneurial, don’t know statistics, don’t know accounting, and don’t understand valuations, what business skills have you really acquired after four years of college? Other important business skills such as relationship building, good management and sales are more often than not learned on the job rather than in school.
  5. Bad Fits and Ethical Problems – I don’t mean ethical problems here in the regular meaning of the word. Instead, it’s an issue of career choices. There are many individuals out there who feel that the business world is full of greed and that the free market is evil. And strangely enough, many of these individuals are business students.
    Personally, I’ve never understood this. If you believe the business world is inherently evil, then what are you doing majoring in business? Perhaps it would be acceptable if you envisioned creating a better company. But most of these students plan to work for the same corporations that they despise. In my opinion, these are the most unethical students in business schools. They’re already engaging in activities that they feel are morally wrong.

When I was on the job hunt almost two years ago, I ran across an interesting opening at a major institutional player. The position was for a research associate who would spend two years training in different groups before settling for the ideal position. The groups included fixed income markets, equities and interest rate swaps. It was one of the best job openings that I’d seen during the recession.

But the opening didn’t ask for any business majors – not even finance and economics backgrounds. Rather, the position asked for biology, chemistry, engineering and math majors for the position. And given the quality of many business students, I’m not surprised by this choice.

Well, I hope that we’re even now on the degree-bashing. And don’t think that some of those criticisms don’t apply to me. I’m certainly not perfect. If I had to evaluate myself, I’d say that numbers 1 and 2 may point to my own flaws. As you can tell by now, I’m not exactly running my own business either, and my focus happens to be on large-scale corporate valuations.

Vedran Vuk is an analyst at Casey Research and the author of the ‘Casey Daily Report.’ He graduated with a BBA in Economics from Loyola University of New Orleans, and is currently pursuing a M.S. in Finance at Johns Hopkins University.

A name change for Simon Power? [update 3]

It seems I’ll have to stop calling retiring National cabinet minister Simon Power by the nickname of Simon Power-Lust. It doesn’t really fit now that he seems to have given up on being Prime Minister.

Why would a man touted by his own colleagues as the next National Party leader step down now, in his early forties, just when he’s entering the  best years of his working life?

I don’t buy the conventional wisdom of John Armstrong, who reckons it’s a simple political calculation based on National’s chances in 2014.  I reckon there’s a little more to it than that.

Here’s a man who, if he hadn’t joined the National Party as a young man, would have faced a future as a Palmerston North solicitor*. A man who missed out on getting offered a big legal partnership, and went into politics instead. A man who as Minister of Injustice has been changing the way those big legal partnerships will all be working; as Minister of Electoral Rorts has re-written Helen’s Electoral Finance Act so insubstantially it continues to help the ruling party; and who as Minister for Public-Private Partnerships has been busy blurring the boundaries of public and private—busy, in other words, putting the state’s resources behind the pursuit of private profit.

And now, coming into the most productive years of his professional life, I suspect he wants to sit on a few of those boards and help reap some of those private rewards for himself by parleying his political connections for profit.

This is more than just Jobs for the Boy.  Because as Minister for Public-Private Partnerships he’s made it possible for much political pull to make many profits—and he’s decided, you see, that he wants to be part of that New Aristocracy of Pull.

He wants to be this decade’s Mai Chen.

He wants a name change from Simon Power-Broker to Simon Power-Lust.

And, mind you, he might also want to come back into politics ten years from now (after making a small fortune from pull) to be a Prime Minister in his fifties.

So you still can’t altogether rule out power-lust.

* Not that I have anything against Palmerston North solicitors, you understand.  Some of my best friends are Palmerston North solicitors. But I reckon Simple Simon always had his sights set on something much more grand for himself.

UPDATE 1: Looks like at least one person agrees with me.

UPDATE 2:  Speaking of political pull, Deborah Hill-Cone lays into John Key’s “pet CEOs”—the “handpicked coterie of business leaders who have his ear and are well placed for government largesse.”  Tooth and claw competition is what businesses need, she says, not John Key's mothering.

_Quote After the Christchurch earthquake there was a headline saying Key had met with a group of his pet CEOs.
    The tone was all "good work fullas" with a hearty slap on the back. Fair enough, but I can't help thinking it would be wise to bring a soupcon of scepticism to this means-to-an-end attitude to getting things done.
    The justification is that being patriarchal is how you make things happen on a large scale - and that might be true in extreme cases. But the reaction to the Christchurch quake - bring in the big boys - is simply a more obvious example of Key's day-to-day approach to business and competition.

[Thanks Shirley R. for the link.]

UPDATE 3:  Slight editing done, and a correction made. [Thanks Chris D.]

Thursday, 3 March 2011

Don’t get “tough” on Christchurch building standards. Get smart.

If I had a dollar for every time I’ve heard someone say we need “tighter” building standards, or that New Zealand’s “tight” building standards saved lives in Christchurch, I’d be, well, I’d be richer than I am now.

Many people seem to labour under the illusion that building standards are a gift of government. That all government needs to do is mandate tough standards for builders and designers to follow, and the world would be a happier place. 

This is really a child’s view of reality.  It’s as if there’s a bag of special tricks that everyone knows about, and nasty builders and designers hope to hoodwink the people who pay them by pretending not to know it’s there.

Off the top of my head, there’s at least three things wrong with this.

First of all, it’s not simply a matter of “tougher” or “softer” regulations. That’s a complete false dichotomy. Good ways to build are neither tough nor soft, they’re intelligent. They’re methods devised by smart people in every generation to do what needs to be done with the material at hand—and many of the smartest building methods use the least material: and the material that is used is used intelligently.

Second, it ignores most of human history. This might surprise some people, especially the paid lap-bloggers at the Sub-Standard, but for most of human history there were really no building codes at all. And the best of what was built over most of that history can be seen on my fridge, because every time friends go overseas they send me postcards to taunt me with where they’ve been. Bastards.

Now sure, the Code of Hammurabi certainly goes back to ancient times—and for those who don’t know this was a rule in ancient Babylon that said if your building falls on someone else’s head, then Hammurabi will cut off yours.  But while tough, this was hardly a prescriptive Building Code. It still relied on some smart person to work out how to build so everyone’s head (especially the smart person’s) was safe.

Which brings us to our third and most important point. The techniques for building so things don’t fall down don’t pre-exist; they have to be created.

Making buildings so they don’t fall down is a science. Some smart person had to look at the problems making other buildings fail, and devise a real-life solution to make sure his building doesn’t. (This is how we got everything from pointed arches to flying buttresses to hypar shells to K-braced frames to slotted concrete seismic shear walls—indeed, this is how we got everything that goes into making every modern building. They represent embodied intelligence. The techniques weren’t simply sitting around waiting for governments to make them compulsory.)

The residue of what these smart people do does might eventually end up in a building code somewhere—if the building code itself hasn’t been written to make these new techniques impossible. (You see one of the problems with a “tough” building code?)  But it sure as hell didn’t start there.

Now, one of the things seismic engineers do especially well is to devise new solutions to the problems that have made other buildings fail—because as most of you will by now have discovered by reading around, the way the earth acts on a building in an earthquake is not always easy to predict.

The Christchurch earthquake is a perfect case in point. 

Up to now, buildings have largely been designed to take gravity loads (which act downwards) and wind and earthquake loads  (which after decades of analysis have always been assumed to act sideways, as you can  see in these Shake Tables use to test building models.)

But this last big earthquake in Christchurch was different. The ground didn’t act that way—and not just because some it liquefied under some of the buildings.

Instead in Christchurch the ground exerted a big sideways force (about as big as the force of gravity, only sideways), and also a big upward force as well. Big enough to be twice as big as the downward gravity force.  Essentially the earthquake threw buildings up in the air (severing some piled foundations in the process) and then let the ground catch them.

And Christchurch’s buildings weren’t designed for that. Nor are any buildings anywhere anywhere else.

This is why a lot of seismic engineers like to keep a fully loaded suitcase by the bed.  Every time there’s an earthquake anywhere in the world, the world’s top seismic engineers head to the airports in droves to see what happened this time, and how the latest theories about seismic engineering have held up.  This is one reason that makes them top engineers.

In Christchurch what these engineers will  surely discover, despite the braying about modernbulding codes saving people’s lives, that both modern buildings and heritage buildings have failed alike. Provincial Chambers, CTV, Pyne Gould, Park Royal, Gallery Apartments, the new council building, Cashel St Bakery building, Old Arts Building, virtually every church in the Cathedral City … all now have either failed or have problems.  Some modern buildings collapsed in surprising ways. Many failed while still saving the folk within. And many heritage buildings lost their outer brick skins, while still keeping roofs, partitions and structural frames intact.

Many of these building were even built (or renovated)  to modern building codes.

They still failed.

Which tells us once again if we’re open about it that it’s not a case of simply being “tough” or “soft” about how people build. If it was that easy to know what to do we wouldn’t have seen over the last few months the government’s and council’s pendulum swinging from insisting before the last earthquake that no heritage building will be demolished (“You will not touch your heritage buildings,” an emotional councillor Sue Wells harangued building owners before the last earthquake) to insisting this week that every heritage building must go.(''What we've got in the CBD is 500-plus [heritage] buildings that will need to be demolished,'' Gerry Brownlee told those building’s owners through the media.)

This is the way governments act when they get “tough.” Without a clue.

The point is not to act tough, but smart.

The real point, perhaps, is to let those who know best do their best.  And people like Gerry Brownlee and Sue Wells are very much not those people.

It’s a matter of devising a method by which those who actually do know the field of risk and structures and construction between them, by voluntary agreement, produce smart intelligent ways to allow people to build in a smart and intelligent way---in a way that doesn’t require ratepayers and taxpayers to assume financial responsibility.

One thing Gerry Brownlee could do if he was smart enugh is to get started on enacting such a proposal that is already sitting around all ready to go in the Department of Building and Housing. The proposal would essentially allow standards to bet set voluntarily by those who benefit most from high standards, and requires risk to sit with insurers, who do that best.

_Quote The discussion document tucked away in the DBH – the Building Act Review – … hints … in short, [that] compliance and regulation would be taken off local government and handed to the building industry. Insurers would indemnify the builder and if a leaky home popped up, the insurer would deal with the homeowner and fix the problem.

Essentially it’s not Sue Wells and her employees that builders and designers would have to convince, with all the risk that implies for ratepayers, but their insurers. This should save everyone in time, lives .. and money.

_QuoteCouncils would not be collecting building permit and inspection fees – the average $15,000 per new house spent in this way would more than cover the cost of indemnity.
    If the developer or builder went bust, the insurer would find another they could trust and fix the problem. The insurer would decide which builders – and developers – to trust. All the council would do would be to identify where the house would go, how high and wide it would be, and what services would hook up to it.
    Looking at the case of [the failed subdivision of] Bexley [for example, where the council allowed the subdivision and home building to proceed on the assumption that designed engineering solutions could compensate for the instability and lack of support of the ground], the indemnifier might want something better than the assurance of an ‘engineering solution’ for the ground problems.
    If the insurer refused to cover the subdivision, the houses wouldn’t be built there.
    This approach would oblige the industry to get out of nappies. It would take licensing builders away from the DBH and cut many of the DBH tentacles gripping and, in some cases, choking the industry. The DBH [or, indeed, whomever the various insurers chose to specify as their variously chosen authorities] would deliver a building code everyone could use and which would ensure safe and functional buildings. That would be the end of its responsibility on behalf of the taxpayer.
    This approach would also require the building industry to face its skill issues. This could be as simple as having labourers capable of following manufacturers’ directions properly when fitting windows, flashings, cladding systems and so on. This was a key factor in the leaky home scenario.
    Insurers would also bring architects in line, with design constraints and manufacturers guidelines. If a homeowner wanted the architect to move beyond certain parameters, it would be the insurer the architect would have to convince, because that’s who would carry the cost if the design ran into problems.
    The phased changes in the Building Amendment Act 2009 are a watered-down version of the changes needed – changes that, ultimately, would take the taxpayer out of the picture if something went pear-shaped, or, as at Bexley [and now the rest of Christchurch], turned to custard.

This makes infinitely more sense than anything I’ve heard in recent days from people talking about “tougher” building standards.

Don’t get tough. Get smart.

And if you need to, get started on getting smart in an Enterprise Zone in Christchurch.

QUOTE OF THE DAY: How to cut govt spending

_Quote That’s the kind of debate we need to have … not the superficial ones about cutting ten million here or ten million there,  but [asking questions] like  “What Should Government Do?” and  “What Should Government Not Do?” and once we get that right the cutting is easy.
   - Yaron Brook,
                              ‘Rand ‘Ol Party: The Intellectual Foundations of the Tea Party,’ 
                              P J T V

DOWN TO THE DOCTOR’S: National – More Government, Less Freedom

_McGRath Libertarianz leader Dr Richard McGrath invites you down to his clinic for an inoculation against this week’s stories and headlines on issues affecting our freedom.
This week: National – More Government, Less Freedom

THE DOCTOR SAYS: This is a bit surprising, as Power was thought to be future National Party leadership material. What disappoints me was his comment:
             “I had a three-year plan which we'd decided to execute once we came into
               Government and it had always been my plan to do that and then to exit.”
    Whaaaat?! Is three years the extent of National’s grand plan?
    This government has barely skimmed the surface of the spending cuts that are needed if New Zealand is to stop its crazy borrowing (a billion dollars every three weeks). There are dozens of government departments that could be sold off, opened to competition or simply shut down.
    Has National done this? No.
    Has it done anything consistent with its values of individual freedom, limited government and personal responsibility? Well, let’s see. We have a higher rate of GST (an election promise broken), the RMA still clobbers anyone wanting to improve their land, and we have an Emissions Trading Scheme to further tax industrial productivity.
    That doesn’t sound like freedom to me.
    The good news is that voters don’t have to vote this directionless administration back into office in November. There is a political party that represents the very ideals that the National Party has soiled by association—that genuinely wants lower taxes, greater freedom for New Zealanders to improve their lives by their own effort, and an end to the parasitic welfare state that threatens to consume those productive people who haven’t yet headed overseas. 

  • DOMPOST: ‘Lost taxes dig deeper hole for financesBureaucrats are concerned that the tax take will drop by $5 billion as a result of jobs lost and capital destroyed by the Christchurch earthquake…

THE DOCTOR SAYS: I can’t hear a single voice rejoicing in the employment opportunities created by the devastation of last week. Thank goodness.
    And that’s because the broken window fallacy is just that. A fallacy.
    When there is destruction on this sort of scale, any benefits to those employed to rebuild homes and infrastructure are enormously outweighed by the loss of plant and capital, real wealth,which had it not been for an accident of nature would have produced goods and services of far more value than the benefits to the rebuilders.
    The broken window fallacy only has legs because the benefits are seen, but the lost savings and production are not.
     What the statists do see however is that the tax take drops sharply when people can’t work. This leaves the government with less stolen money to redistribute and thus less ability to buy votes. Bad news indeed for state-worshippers. Hence, after this February 22nd earthquake there has been a blessed lack of people peddling the broken window bullshit (unlike the situation after the September 22 quake when dozens of alleged economists leapt into print to talk up the earthquakle's "stimulus" effect).
    As for the suggestion that taxpayers put thousands of beer-sodden boofheads into luxury accommodation aboard a cruise liner during an international rugby tournament later in the year, the bureaucrat who came up with this Great Ideas should be released from his current job and made to raise the money needed privately.

  • STUFF: ‘Super regulator to get extra powers A new “super regulator” will be able to force anyone making unsolicited approaches to buy shares from investors to reveal how much the shares are on the open market…

THE DOCTOR SAYS: Oh dear. Seems investors are too dumb to look at share prices and calculate the net worth of their shares, so Nanny has to ensure that anyone who wants to buy those shares tells them.
    What next? All vendors on TradeMe having to state a market value on the items they are selling?
    This is another embarrassing demonstration of National’s failure to grasp the fundamentals of market economics.
    Information held by buyer and seller is always asymmetric in every transaction. Understanding that this is a feature not a flaw is one of the starting points for understanding real world economics.
    A free market does not mean perfect information and equal knowledge. It does mean freedom of speech and expression. It means the absence of coercion. It means buyer (and seller) beware. It means willing buyer, willing seller and the government minding its own business and staying out of people’s private affairs.
       For goodness sake readers, chuck out these blue-rinse-socialist Tory tossers this coming November. Don’t give these wankers the sanction of your vote and the opportunity to run your life for you with your own money.
    Vote instead for a party that acts according to principle, or don’t vote at all. It only encourages the two-faced lying bastards.

Liberty means responsibility.
That is why most men dread it.”
- George Bernard Shaw