openDemocracy wants to tell us all that coronavirus has entirely upended the assumptions of neoclassical economics. This is because openDemocracy doesn’t have the first clue about the assumptions of neoclassical economics. This is not, therefore, a good starting point for a reordering of the economic assumptions we use when trying to deal with reality.
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Perish the thought that we may allow those pesky Africans to export food to the UK without tariffs. If we allow that they might not need our charity, then how would we feel superior to them? September 29th, 2020 | 16 comments - (Comments are closed)
That was said by Vicky Osterweil, author of In Defense of Looting. Ms Osterweil was given such a fawning interview by Natalie Escobar of the American state radio station npr (note the cool lowercase initials) that it became an embarrassment, and the record of it is now prefaced by the words:
September 5th, 2020 | 25 comments - (Comments are closed)
None of the arguments against rent controls are new. You can already find them all in Verdict on Rent Control, a book which the IEA published in 1972. The book is actually a collection of papers on the subject, some of which are much older than that. It contains one paper by Milton Friedman and George Stigler on wartime rent controls in the US, which were still lingering after the war had ended. It was first published in 1946, but they were already having the same arguments then that we are still having today. The oldest contribution is a paper by Friedrich Hayek, on rent controls in interwar Vienna (which he obviously did not call “interwar”). Hayek shows how rent controls do not just lead to shortages of rental properties, but have all sorts of secondary effects that distort the wider economy, for example the reduction in labour mobility. This was first published in 1929, and yet, the parallels to today’s situation immediately stand out. Economic papers often end on the more cautious note that “more research is needed”. You would not do this in a publication on rent controls, because the situation is too crystal clear. No more research is needed. We know – or rather, could know, and should know – everything there is to know. What we need to do is finally accept it. August 21st, 2020 | 25 comments - (Comments are closed)
For a variety of reasons, the sector that is sometimes dubbed “The City” (or for that matter, “Wall Street”) has not much connection to capitalism these days. Sure, financial institutions still channel money to borrowers who may include businesses that are investing it in some way. But given how central banks act as lenders of last resort, print money without limit, it seems, and interfere with the capital buffers and dealings with firms to the extent they do, this hardly counts as a free market. Obtaining a banking licence, for example, is not straightforward. The way that central banks and regulators can prop up established institutions, and interfere with their internal workings, is a clear case of the “mixed economy” at best. (Here is a good book on the subject and why claims that problems in financial markets were down to de-regulation are unfounded.) The latest example of how financial services are increasingly being absorbed into the maw of the State comes from the Financial Conduct Authority. Its new boss wants to block appointments of directors at firms if they are too white or male. Unless a firm names sufficient numbers of women and members of ethnic minorities to sit on boards, the appointees currently in play might be blocked. Whether the persons being blocked are more competent or experienced will be secondary to their gender or colour if the choice comes right down the wire. (No-one wants to admit that this is what will happen.) It is true that a preponderance of people of Group A or B can occupy certain roles and that this is not necessarily anything about bias as such. There are feedback/network effects when it comes to people being selected as directors or some other role. A knows B, who has been chummy with C, and C recommends D for a directorship at Filthy Lucre & Sons, and so it goes, and while there are still interviews and qualifications to think about, it is easy to see how a lot of people who go for certain jobs come from the same sort of pool. We see this in politics, even sport. (A schoolteacher might seek out black kids because he or she assumes they are great at athletics, and so over time a disproportionate number of black students are track and field athletes, etc). And even when people try hard as possible to make their choices of talent more diverse, it is not always easy to do if the pipeline of talent is not there. Firms need to have directors, etc – so if there is a talent shortage created by a pro-diversity policy that could hamper corporate governance and add yet another competitive disadvantage. It is actually time-consuming and potentially costly to find certain talent – which is why City firms pay retainer fees to headhunter firms to find people (I know a bit about how this market works). Believe me, firms are desperate to recruit a more “diverse” management base – but they also have to locate the best they can find. And if the judgement call is about who is going to make the business better, that judgement should rest with the people who own the firm, not some civil servant ticking off some sort of virtue box. Another point: when talking of “diversity”, such comments from the likes of the FCA invariably focus on gender and race. But rarely do you hear about diversity of experience, philosophy and background. Arguably what the City and other clusters of business need is to avoid group-think and stifling consensus. Imagine hiring a director who is a genuine liberal, who thinks that a lot of modern “corporate social responsibility” policy is a waste of time and so much fashionable cant? That firms’ primary duty is to build shareholder value, rather than push some sort of agenda? Ask yourselves how much chance this person might have of getting a seat on a board if his or her views are widely known? I don’t actually have to ask because you know the answer. It might have escaped the notice of the FCA and other policymakers, but the UK and the rest of the world is trying to recover from one of the worst calamities in recent human business history – the lock-downs – and therefore adding hurdles towards recovery and rebuilding of business might not be a great idea. August 4th, 2020 | 8 comments - (Comments are closed)
Labour launches new campaign with “24 hours to save British jobs” warning, reported the website Labour List the day before yesterday. August 1st, 2020 | 5 comments - (Comments are closed)
Sometimes you do not quite appreciate a thing until you find you can not get it. In the game Half Life: Alyx (one of the best things you can do in virtual reality right now), the Earth is oppressed by totalitarian inter-dimensional rulers and the player must roam the deserted, alien biohazard-infested quarantined streets of City 17 as part of a resistance attempting to sabotage enemy super-weapons. Needless to say luxuries are hard to come by. It is all a bit close to the bone for a game that was in development for four years and released on March 23rd. As Alyx, controlled by the player, has to make her way down a dark, slime-soaked, head-crab-infested passageway, she asks her friend Russ to talk about the past to provide some comfort. What was life like before the coro^H^H^H^H Combine? “Alyx, have you ever heard of a club sandwich?” Er, nope, not once.
You guys had all that? That’s insane.
Wow. That does sound pretty amazing. I am really going to appreciate my next club sandwich. July 16th, 2020 | 6 comments - (Comments are closed)
“Brussels moves to preserve access to London clearing houses”, reports the Financial Times.
To be frank I have only the vaguest idea what a clearing house does. It sounds worryingly like tidying. But whatever it is, for the EU to adopt “emergency measures to preserve Europe’s access to crucial UK financial market infrastructure” seems a distinct change from its previous policy, also mentioned in the article:
I am not surprised at the investors’ decision. I do not need to be an expert in decluttered differentials to be able to work out that if the EU felt the need to pass laws to make it easier to force investors to move their business out of the UK that means they would be better off staying put. July 11th, 2020 | 17 comments - (Comments are closed)
As several commenters here note, a big feature of the current “woke” cultural revolution is how corporations have been actively going along with the drive towards “diversity” and “inclusion”. As I like to point out, free enterprise capitalism at most competitive is arguably the best way to drive out irrationalism and bigotry – an irrational firm that blocks the advance of men and women because of race etc is likely to lose money and be outperformed by firms not run in such a way. Let me repeat: bigotry is a cost. (Check out this article about racism, the Jim Crow laws, and free markets.) Which is why it is wrong to claim that capitalism is somehow intrinsically racist. Some of the actions that firms take to make their products, services and hiring polices more supposedly enlightened have, however, backfired if they contrast with actual reality. A case of about a year or so ago is Gillette, the brand of Proctor & Gamble, which decided that a way to connect with younger men was to denounce “toxic masculinity” and make out that many men are a bunch of loutish, beer-swilling boors who like barbecues. Seems like a winning, er, strategy. That was a case of a business that decided to trash its core audience – men. Great work, chaps! Another, more recent example of how a commendable desire to avoid bigotry has tipped over into Maoist-sounding insanity comes from Royal Bank of Canada, Canada’s largest bank. I got a press release the other day. Here goes:
I like how the bank refers to “systemic racism” without a need for scare quotes. It uses the term without any sign that this is controversial or might be contentious. It refers to it as a fact. But the kicker is in the following, and I suggest anyone who thinks of working for RBC and similar institutions, had better take note of this “struggle session”:
In other words, everyone – whether they have been hauled before HR for a supposed misdeed or not – are going to be lectured about their “unconscious bias”, just to be sure there are no gremlins inside their heads. No more using “micro-aggressions” such as the term “colour-blind”, or too much reference to dodgy stuff such as “merit”, “professionalism”, or, god forbid, “boosting shareholder value”. (Running a bank to make a profit – how fucking evil would that be?) And RBC is hardly going to be an exception. At more or less any large organisation, this is going to be the standard, not the exception. I wonder how many people who try to get a job there (and given the wreckage caused by the lockdowns, people may not be able to be choosy), will have hours of their lives wasted while some HR idiot asks them to talk about their “unconscious racism” rather than learning about how to deliver services and products, or come up with new ones. Part of this will no doubt play to the fact that part of the contemporary higher education system is churning out people with degrees that have limited traction when it comes to building successful business, but might be absolutely perfect for jobs in HR. Expect further gains in demand for people working in “diversity and inclusion” but who can barely comprehend a balance sheet, a profit-and-loss account, or for that matter, compound interest. One consequence of all this is that people with an ounce of self respect, if they think they must work for a large corporation for a while to learn skills and build contacts (which is what I did) will want to break free asap, and work for themselves, and run their own businesses. If corporate HR continues down a route of compulsory indoctrination about “critical race theory” and all the rest, no-one of real talent or enterprise will want to waste time there. And when the lousy shareholder performance shows itself, you can bet that those arguing for all this will not own the consequences. And they won’t be willing to confront the fact that a firm’s future is increasingly under pressure if it spends more on HR “resources” than R&D. There is, of course, a more “pragmatic” reason why firms such as RBC and others are doing things such as this. They are covering their behinds, and fear (with some justification) what could happen to them if they don’t go along. Read that press release again, folks, and note that while it talks about hiring goals, there is no specific time-frame or reference to quotas (yet). Ryan Bourne has this measured article saying that some of this corporate “wokeness” might not even be all bad at all, and just how firms shift with the times. But even Bourne realises how some of this culture war stuff is getting dangerously out of hand. July 8th, 2020 | 60 comments - (Comments are closed)
There are lots of reasons in my mind why UBI would be a bad idea. I know that some libertarians/classical liberals, such as the late Milton Friedman, favoured a form of it in the form of “negative income tax”, but largely because they wanted to sweep together existing welfare benefits into a single payment, and for that payment to be cut fairly low so as not to kill incentives. More recently, I have seen folk such as some (not all) “transhumanists” claim that in our marvellous tech future where there is no scarcity, we can have all these goodies for “free” (no more of that stuff about “there’s no such thing as a free lunch”), and that therefore UBI will be affordable and that it will be needed, as conventional “work” no longer exists. This sort of argument is bound to be made more and more because of how work practices have been hammered by the lockdowns, among other forces. Apart from the implausibility of the idea that scarcity will be overcome – as seen by this critique of a Charles Stross book, another reason why I distrust UBI is that it is going to create a whole class of entitled brats if UBI were to not just replace existing welfare, but be added to them in significant ways. We have had a recent demonstration of what happens when lots of people are paid for doing nothing, with only a few diversions to amuse them, and the results aren’t pretty. Do we want to scale that issue of people living in prolonged adolescence even more? The cultural/economic consequences of a world in which a handful of evil capitalists are paying all the taxes while the rest of the population loll around on UBI, updating blogs and being generally bored out of their minds is not one I look forward to. It could end up as Ray Bradbury-meets-George Orwell-meets Aldous Huxley. Here is a good case against UBI from David Henderson. UBI is a terrible idea, at least in terms of somehow covering a vast chunk of the population and funded by a small group who, apparently, are happy to do so without conditions. If people think I misrepresent what UBI is, and can achieve, by all means come back to me in the comments. So far, all too often it appears to be sold as some sort of utopian replacement for work. I am not buying it. July 3rd, 2020 | 31 comments - (Comments are closed)
The most significant thing about this Daniel Hannan tweet, I think, is not his praise of a Michael Gove speech, but his aside to the effect that FDR “turned a recession into a depression”. This idea is really getting around, and this is a very good thing. It was the New Deal which put the Great in the Great Depression. (I found myself emitting this sentence at the end of this at my personal blog, which started out being about something else entirely, namely the current Lockdown, rather than about how the world will or will not emerge successfully from it.) I just googled the above epigram, and the first piece I got to asked: Did New Deal Programs Help End the Great Depression? That item one in such a search casts doubt on (rather than simply endorsing) the claim that The New Deal did end the Great Depression, is a big propaganda step in the right direction. What people now think is the quickest and best way to end an economic recession matters very much. That surely being why Hannan felt the need to say this about FDR’s disastrous economic policies, even though he was tweeting about something else. June 28th, 2020 | 16 comments - (Comments are closed)
As Ludwig von Mises states in his magnum opus, Human Action, the “market process is the adjustment of the individual actions of the various members of the market society to the requirements of mutual cooperation”. Thus, markets will always be imperfect, but that is precisely why markets exist in the first place! Markets never conform to the “ideal” of perfect competition, but this is completely irrelevant, since under such state of affairs, markets are unnecessary and redundant, since all resources are already perfectly allocated to their most valued uses. Market processes exist precisely because to generate the information necessary to better coordinate the plans and purposes of individuals in a peaceful and productive manner. The entrepreneurial lure for profit and the discipline of loss is what guides such imperfect processes in a tendency towards the creation of more complete information between buyers and sellers. – Rosolino Candela, from Are Markets Imperfect? Of Course, But That’s The Point! May 19th, 2020 | 4 comments - (Comments are closed)
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