Adam Smith Institute

Another snippet from this fascinating upcoming book, Power and Plenty:

Buringh and van Zabden show that European book production rose at roughly 1% per annum between the sixth and eighteenth centuries, from an annual production of roughly 120 manuscripts over the course of the sixth century to the 20 million books printed in 1790. 

The thing that leaps out at me is the incredible power of compounding: we often hear that we should give up this or that little bit of economic growth on this or that grounds, but in the long term that slowing of growth is extremely expensive, look what just 1% leads to.

Another illuminating little exercise is to look at, say, the effects of the Greenland ice cap melting. According to the IPCC this is booked in for sometime after 2500 AD if we don't change our ways. If we assume current trend growth rate (2.75% say...and always asuming that I've used this calculator correctly, no certain thing) then people in 493 years time will be 643,342 (and a bit) times richer than we are. If it is true that the rich should pay for global warming then shouldn't it be those in the future, those more than half a million times richer than we are?

 A nice little reminder of a basic classically liberal thought. Yes, we are against business gorging on the taxpayers' money, just as much as we are anyone else. Corporate welfare is no more admirable (and as compared to those who really need aid, less so) than any other kind.

An extraordinarily awful and depressing story of the vileness of which man is capable.

It would appear that the scientific credentials of those at the IPCC who have created the scientific consensus about climate change are less robust than is often thought. 

With stories like this it's difficult to believe that we have the very best patent system possible. 

Perhaps not the very bestest honours list ever? 

Just to dispel any rumours of Netsmith's philistinism, a sketch of 20 th century music trends and a wonderful art exhibition. 

And finally, the EU and comic characters. Please make up your own jokes about the EU as comic characters.

My true love sent to me: six geese a-laying. In the song, this seems to refer to the six days of creation.

But talk of geese or turkeys makes me think rather of destruction - the destruction of birds due to bird flu, and indeed cattle due to BSE and foot & mouth. I don't know how much of these disasters should be put down to the diseases themselves and how much should be put down to government incompetence. When you have officialdom closing down agriculture for months on end and slaughtering tens of thousands of animals; viruses escaping from government research centres; Edwina Currie putting the nation off its eggs; Sir Liam Donaldson scaring us with the prospect of 50,000 human deaths from bird flu, then maybe government is the bigger threat.

That, of course, and the interest groups. These scarces are all very useful material for those who want us to give up eating meat entirely, those who want to protect UK agriculture from foreign imports, and those who are just against the modern international economy and want us to stop flying, stay at home, and live quietly in cabins on our smallholdings. In the scheme of things, AIDS, malaria, filthy water and road accidents are all bigger killers. Why don't we focus a bit more attention on them?

From Power and Plenty:

Another important economic link between Venice and the Ottoman Empire was the sale of high-quality Venetian woolen cloth to the latter. In the course of the 17th c., however, the Dutch and English, yet again, displaced Venice and the other Italian producers in the Levantine markets for these key manufactured goods. Charles Wilson pithily accounts for this by observing that "the Turks wanted cheap, light cloths. The Venetians offered dear, heavy ones." Constricted by guild regulations, Venice insisted on maintaining high quality and high prices. Meanwhile, northerners lowered quality and price... 

That old saw about those who ignore history being condemned to repeat it comes to mind really. Most obviously in the current success of clothing chains like Matalan and Primark: it appears that what the Brits want is cheap and light and so if you lower quality and lower price...

And so many  business disasters can be explained by that "constricted by guild regulation" line. No, it doesn't mean just unions, management has been just as purblind at times: the Austin Allegro was proof that there are things too light, too cheap and too low quality even for the British.

The basic lesson though is obvious, isn't it? The producers who actually provide what the consumers want prosper, those who attempt to supply what suits themselves do not. The next question I suppose is which side of that line Microsoft Vista belongs?

There may be trouble brewing for some microbreweries! A worldwide shortage of hops is starting to make its mark on the price of beer. The cost of some hops, the ingredient that gives beer its distinctive flavour, has quadrupled in price over recent years.

A whole host of factors are behind the current price rise: poor crops, bad weather, and most of all lower prices. All of which has led to a decrease in supply. This is a perfect example of supply and demand economics in action. The price fluctuations that the consumer sees are a reflection of a market that is free.

The price of hops had fallen in recent years due to over production and low demand from breweries. This meant that many producers left the market to grow other more profitable crops, such as cherries and apples. But then as hop production fell, beer had a resurgence in popularity. While the big companies have insulated themselves from this through futures contracts the microbreweries have been left to fight it out over the remainder. It’s all very apparent from the global hop acreage figures, which have fallen from 236,000 acres in 1992 to 123,000 in 2006.

Hops then wouldn't be a bad investment for the farmers of South East England. Unfortunately it takes three years for a hop field to produce, so in the meantime beer drinkers are going to face slightly different tasting and higher priced beers. And unfortunately for some microbreweries, they may go out of business, especially if the taste of their beers is not able to match up to the price.

Is it better to read a dead tree magazine? Or the online version? Chris Anderson thinks it's the paper version. Martin Stabe begs to disagree (sometimes).

More on the Danes and their tax rates and emigration. It's the English language that is doing some of the damage.

Even more: there's only one country that has tax laws which make such escapes impossible

A tawdry tale of what happens to the money extorted from us. 

As is increasingly happening, the arguments of Paul Krugman the columnist are refuted by those of Paul Krugman the economist. 

For those still unsure exactly what a CDO is (or why they've become a problem) here's the explanation. In short, too much of a good thing. 

And finally , a new political lexicon (the less polite description is the explanation of how politicians are lying to us: whether they are or not is of course not at issue). 

My true love sent to me: five gold rings. It probably means the first five books of the Old Testament, but to me five rings means the Olympics, which are coming to London in 2012.

Well, they say that. But it's a typical government-led project, so who knows? The London bid for the games put the cost at £3,375m, but in March this year Tessa Jowell revealed that the cost had risen to £9,300m - a tripling of the costs in just a few months. Something of a black hole, which the hole-vaulting Culture Secretary explained as due to VAT, inflation, and a whopping £2,700m 'just in case things go wrong' fund (a figure larger than that the original estimate for building the entire Olympic Park. As the bulldozers move in, it cannot give much confidence to their operators that the costs of all this, including their wages, are still being calculated.

The Scottish Parliament building started with an estimate of £40m and ended up costing £400m. Still, we taxpayers can afford it, can't we?

One of the perks of this wonk land stuff is being sent books before their publication date so that we terribly important people can tell you what to think about them before you read them. As with the upcoming "Power and Plenty" which bills itself as an economic history of the past thousand years. I found it fascinating and it'll provide me with all sorts of wondrous arguments to deploy in times to come, some of which I'll sketch out in the next few days here (no, don't worry, I'm not going to try a comprehensive review of such a complex book in a blog post).

One of the things I like about it is the way that little factoids pop up which explain, make clear in a simple manner, quite complex situations. At one point we're told that the Mongols commanded the services of 50% of the world's horses. At a time when the animal was both the transport to the battlefield and the tank equivalent once there this rather explains some of their success, doesn't it? Another is

...the number of operative hours to process 100 lb of cotton was over 50,000 for spinning by hand in India. In England it was cut to only 2,000 by the 1779 invention of Crompton's mule, and fell to 300 by 1795 and 135 by 1825, compared with 40 in 1972.... 

That after two centuries only 0.1% or less of the man hours are required to do the same thing as before rather explains why our cupboards are filled with a multiplicity of clothes while our forefathers had, if they were lucky, two outfits, daily and Sunday best.

The excellent point is also made that such technological advance really rather required international trade: without it, the domestic market would quickly have become flooded and the economies of scale would never have appeared. 

Opponents of enhanced parental choice [in education], such as Mr Balls [the Schools Secretary], say what most parents want is for their local school to be a good school. That is the ideal situation but, as Lib Dem education spokesman David Laws has noted, that is an aspiration, not a policy. A policy requires a mechanism for making it happen. Parental choice through a voucher scheme is precisely such a mechanism. A continuation of commandments from Mr Balls is not.

- Patrick O'Flynn hits the nail on the head in the Daily Express.

Excellent advice for those who would understand either American politics or economics in general. Read PJ O'Rourke. Greg Mankiw (who teaches the ec.10 course at Harvard) has been known to add him to his reading lists.

For those who would go a little deeper, another recomendation. Hernando de Soto manages to explain more about why some places grow and others don't.

Gary Becker explains something about the sub prime crisis:  it can't have been a plot by predatory lenders, as it's the lenders who are losing the money (unless said lenders were in fact insanely stupid which would be a rather different problem).

(Sweary alert) We have the usual sight of politicians being generous with our money, not so much with their own.

A thought on social democracies and their high tax rates :  how do you keep them (both the taxes and the citizens subject to them) when emigration becomes ever easier?

One way the net is changing the world: making the oddest of hobbies easier. 

And finally , Bah Hecate! to the whole Christmas thing. 

My true love sent to me: four calling (or colly) birds, which in A Partridge in a Pear Tree are said represent the four gospels or the four evangelists, Matthew, Mark, Luke, and John.

Emvironmentalists have been very agitated of late by the government's plans to build a barrage over the estuary of the River Severn, in order to generate power from tidal movements. The argument is that the estuary is home to many species of wading and migrating birds, who could no longer survive there.

Birds aren't actually as dim as we think, and if they lose one habitat I've no doubt that they will fly off and find another. But the barrage idea is pretty bird-brained in that the amount of power that it would actually generate is tiny in relation to its cost, including the largely unknowable costs of maintenance. An even more bird-brained plan emerged last week - a massive programme to build offshore wind farms that might produce up to 20% of the UK's electricity within just a few years. When you look at the sums it means building and installing two generators the size of the London Eye every day, but politicians were never very good at questions of feasibility (or cost - remember the Scottish Parliament).

Frankly, these renewable energy sources are viable only because of the £1bn or so electricity customers are forced to stump up for the 'renewables obligation'. Though I'm not sure whether marine installations will ever be viable (how do you even get to them when they need a spot of oil? And who's going to pay for strengthening the grid to take all this extra power they're supposed to generate. And when we've all got our turkeys in the oven and the wind isn't blowing, what then?). We'd be better, cheaper and cleaner building new nuclear power stations. There - I've said it. Otherwise, a light near you will be going out soon.

The Tax Justice Network have a nice little graph here . Their contention is simple: the more of GDP that the government takes in tax then the lower the rate of child poverty. We can thus justify massively higher taxes because we're doing it for the children. I questioned their US figure of 22% of children in poverty because the usual one (US Census) is 12% or so. Here's the definition of poverty that they are using:

Share of children 17 years and under living in households with equivalized disposable income less than 50% of median income; Society at a Glance: OECD Social Indicators, 2005, p.57.

This, of course, is not a measure of poverty, this is one of inequality (or relative poverty, if you prefer). As long as we remember this crucial distinction, the TJN are of course quite correct. The outcomes from the market allocation of incomes can strike some as unfair and different societies seem to have different takes on how much of this they wish to remedy. That remedying done by greater taxation on higher income earners and the single, the money being given to lower income earners with children. This lowers the number of children living in such relative poverty. All of this is, I would hope, obvious, along with the corollary that the less redistribution the closer to the market allocation of incomes we shall be.

All of which means that what the TJN graph actually shows us is that in places where you have less redistributive taxation and spending then you have less redistributive taxation and spending. Something which isn't, if I might be frank with you, a finding which is either surprising or shocking.