Blog Review 849

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"Fixing the economy"....unfortunately it's not a machine that can be fixed but an ecosystem. Strangely it's the same people who argue that ecosystems are so complex we can't interfere in them simultaneously argue that the economy is so simple that we can.

This government spending multiplier. Is it higher than one, less than one, or even possibly negative?

The Easterlin Paradox resolved or, no, inequality doesn't matter that much.

The real reason there's a squabble about short selling.

A wonderful tale of bureaucratic competence.

Ragging on Oliver James.

And finally, little known inauguration news.

Blog Review 848

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Adam Smith, pirates and the invisible hook.

Suspending trials for people who have been waiting years for trial? Eh?

Cognitive biases are useful, just as cliches can describe something well.

Odd to see the lump of labour fallacy in an inauguration speech.

Thre's still something of a knowledge problem out there in macroeconomics.

Yes, jobs are a cost when you do a cost benefit analysis.

And finally, why hasn't anyone thought of this before?

Blog Review 847

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Civilisiation is undone. At least the online subset of it. There's now more money in politics than there is in porn.

A reminder of what a certain political approach to the real world always seems to result in.

Two interesting pieces from the OECD. High taxes reduce productivity and high taxes do have Laffer Curve effects.

A bold statement about climate change and quite possible a true one as well.

All too often plausible theories turn out not to be all that plausible when you really study them.

One reason many economist fall into error is that not many economists have actually read Adam Smith.

And finally, not new but now it's official.

Robert Burns, Poems, Burns Suppers, Haggis – and Adam Smith

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This Sunday, 25 January, marks the 250th anniversary of the birth of Robert Burns (1759-96), Scotland's most celebrated poet. He gave us poems and songs such us O, my Luve's like a red, red rose, and Comin Thro' the Rye, not to mention the Address to a Haggis (which is traditionally eaten at Burns Suppers at this time of year to honour his birth). He wrote in the Lowland dialect and is remembered for phrases like "Oh wad some Power the giftie gie us, to see oursels as ithers see us," "A man's a man for a' that." and (to a mouse) "We sleekit, cow'rin', tim'rous beastie."

The spin-doctors of the time hailed Burns as the "Poet Ploughman" and he did indeed work on the land in his native Ayrshire.. But he was well educated, at home, and at a local school. At that time, and particularly in Scotland, even the poorest families strived to give their children the best education they could afford – something that is often forgotten today amid the propaganda for universal state education.

Probably before his twenties, indeed, he had already read Adam Smith's The Theory of Moral Sentiments, published just a few weeks after Burns was born. Smith's humanity, evident in this work, obviously struck a chord in the young Burns; the book was, he wrote, a great influence on his life. He admired Smith, and wrote of The Wealth of Nations, "I could not have given any mere man credit for half the intelligence Mr Smith discovers in his book." Like Burns, Smith was of course also fascinated with language, and Burns must have known of Smith's lectures on rhetoric and belles lettres, even though these were not published until after Smith's death.

Smith too appreciated Burns's talent, and ordered an advance copy of his Poems, Chiefly in the Scottish Dialect. When Smith was appointed a Scottish Commissioner of Customs, he was able to recommend Burns as a Customs Officer in Dumfries – and probably did. But it seems that the two never met. Burns did arrange to pay a visit to Smith in 1787. But by that time, Smith was unwell (he died in 1790) and had to leave the day before to seek medical treatment.

Power Lunch with Grant Shapps

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Grant Shapps MP, the shadow housing minister, was our guest at a Power Lunch in Westminster yesterday. He seems in no doubt that much of the rise in house prices over the last few years is down to a fake boom engineered by Gordon Brown, with some help from the US politicians and financial authorities too. 

And certainly, Brown make the Bank of England focus on an inflation measure that stripped out housing costs. So while house prices doubled, they had to sit back and ignore the fact.

House prices will undoubtedly fall a lot further as Brown's inflationary boom works itself out. So what is housing going to look like then? Like me, Shapps would like it to be a sector that is driven far more by local market returns and incentives, rather than on clunky top-down decisions by ministers to build three million homes, or politicians sticking pins in a map and declaring them the sites for new eco-towns, whether local people want them or not.

We need a system in which local people get the benefits of development, and not just their costs. At present, builders face the so-called 'Section 106' process, in which they have to agree to make a third (in London, Ken Livingstone wanted it to be a half ) of what they build 'affordable'. But that just raises the cost of the rest, and it doesn't help people who are already resident there. If builders are going to face this sort of development tax, it should go to purposes that the local community actually wants – tidying up the high street, for example, or upgrading the general infrastructure, or even reducing the council tax. Then local councillors and residents would see gains from new development, instead of just resisting it.

Blog Review 846

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It's an old old story. If you're facing string economic pressures then something has to give. Interest rates and exchange rates work. But when changes in those are not available, you have to fall back on changes and reductions in nominal wages (as well as changes in real wages). Such changes are not a pretty sight in democratic nations.

The latest bank bailout is Her Majesty's version of AIG. Like it worked so well when it was just AIG without  Her Maj, right?

So do we want nationalisation or nationalisation with due process?

After all, property rights are essential not just to liberty but to any pretence of a functioning economy.

You don't have to be entirely an Austrian to see that there are merits to certain Austrian ways of looking at events.

Just how independent is a "charity" with an income of £500,000 a year, less than £5,000 of which comes from voluntary donations?

And finally, past thoughts on geoengineering.

Blog Review 845

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It isn't quite true to say that a bank which is insolvent has no value. Strange thought, but true all the same.

We'll have an inaugural speech tomorrow and there will be many ooohs and aahs. Here's Milton Friedman's response to an earlier such speech which got a lot of such adulation.

The perils of this libertarian paternalism.

Apparently simple economics is beyond the ken of our own bureaucratic paternalists.

The joys of fiscal stimulus. We've had at least three such stimuli in the past 8 years: guess how well they worked out?

A site that you really do want to contribute to. Keeping track of those charities which are simply mouthpieces for government propaganda.

And finally, fare thee well, Tony Hart.

Blog Review 844

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That coming stimulus plan in the US. Amazing how much the list looks like all the things that various lefties have wanted for ages rather than, you know, a stimulus.

We know why the politicians are converted: they get to spend lots of other peoples' money. But why are so many economists now recent converts to Keynes?

Not good news for the German economy....and looking back at the past performance, what were the benefits of Rhineland capitalism again?

We can indeed solve poverty: why not simply kill the poor?

This bad bank idea being floated at present. While our most recent Laureate did like Gordon Brown's last idea, he doesn't like this one.

A website you don't want to miss. Free and open conversation with New Labour.

And finally, useless superpowers.

Five Days in Quangostan

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Five Days in Quangostan or more like Five Days in Hell! That's one man's interpretation of what daily life in the UK could soon become, especially if it carries on journeying down the road it's currently on.

Greg Kane, an ordinary citizen, is constantly harassed and hounded by the state. It gets worse when he takes a highly confidential letter from the Chief Constable to the Home Secretary. On top of his day-to-day trials and tribulations due to the idiocy of bureaucracy he now faces up to the state’s trump card, the use of legitimate violence. From the first day in the novel, as a reader, you are left banging your head against a wall at just how ridiculous life is becoming but throughout you hope that the eponymous hero can outwit those that stand in his way of leading a 'normal' life.

This was an enjoyable read, irreverent and entertaining, if not a little worrying as a precursor to what the UK could become like as it slips ever more into the abyss. For my own tastes it is perhaps a little conservative but none the less the general theme is one that both libertarians and conservatives can attest to: the state and its agents are incessantly ruining the lives of the majority. I'm sure any person who reads this book can relate to at least one of the multitude of taxing experiences that the main character suffers. Which is testament to how far we have come down the wrong road!

The book is available to buy from Amazon here.

Blog Review 843

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Milton Friedman responds to Naomi Klein's assertions (no, not a seance, just modern recording technology).

Why the newspapers and magazines are going to report this recession as the worst ever. For for them, it is.

While, at least so far, it doesn't seem to be the worst.

And at least there are simple ways of solving such minor problems.

That old revealed preferences thing rears its most amusing head again.

Another reminder of how the various governing bodies acquire their cheerleaders.

And finally, who wouldn't want to work for a newspaper like this?