How is carbon trading going in Europe

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@JulieAnneGenter tax havens underwrite The Great Escape from extreme poverty in developing countries

Tax havens and offshore financial centres are vital to the economic development of poor countries. There are plenty of countries, poor countries, where the ability to move funds offshore is fundamental to successful investment. That is missed in the reporting of the Panama Papers:

Consider the big names that have shown up so far on the list. With the notable exception of Iceland, these are not countries I would describe as “capitalist”: Russia, Pakistan, Iraq, Ukraine, Egypt.  They’re countries where kleptocratic government officials amass money not through commerce, but through quasi-legal extortion, or siphoning off the till. This is an activity that has gone on long before capitalism, and probably before there was money.

Tax havens and offshore financial centres offer a way in which entrepreneurs can make an honest investment, secure a return and put it aside safely from the reach of the minister’s cousin who wants to muscle in once the business succeeded.

A major problem in poor countries is short time horizons for investment. Entrepreneurs must make their money quickly.

Many years ago there is a survey of entrepreneurs in Russia and Poland. It was in the early 1990s. Each was asked whether an investment project that doubled their money in two years was worth the risk. The Russian entrepreneurs mostly said no, the Polish entrepreneur said yes.

So insecure are the returns from investment in Russia at that time that the phenomenal returns were required before an investment was made. They would only invest if they could double the money in two years.

Many years ago, Mancur Olson wrote an insightful book about prosperity and dictatorships. He introduced the concept of rights intensive production.

As countries become more and more developed, investment horizons lengthen and depends more and more upon the enforcement of contract and property rights in a tolerably honest way.

Instead of being the first entrepreneur to introduce the most basic technologies and profit handsomely, entrepreneurs are introducing a product upgrade or new product that is a minor improvement on current offerings. Such investments will take time to pay off.

In many developing countries, China as an example, property rights are insecure. One way to secure your investment is to take the proceeds offshore to a tax haven. If everything goes wrong, at least you got some nest egg overseas.

As many developing countries have corrupt politicians and dishonest courts, the way to secure gains from honest investments is to move some of the profits offshore. That is why tax havens are essential to poor countries growing richer.

One of the sources of Hong Kong prosperity was investors would deal with a Hong Kong-based company with the requisite political and economic links to China. They could enforce their contracts in China against their Hong Kong assets because the contract was based in Hong Kong under British law.

If the local legal system is inadequate, entrepreneurs well look overseas for mechanisms to force contracts and secure their returns on investments against confiscation.

Capitalism will abolish Laundry Day: The most hated chore in the history of housework

Mostly Economics

Sarah Skwire takes you to the old days when washing laundry was such a task for most women. And how things have changed gradually thanks to the capitalism. Actually more than capitalism it is technology which has enabled this important change to lives of women much like gas stoves.

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#nevertrump I have been banned from yet another sub-reddit

The offending link from Nate Silver on Republican primary polling trends was my 2nd ever post to that sub-reddit!

Trump supporters just cannot handle the truth.

New Paternalism, Regulation and Cass Sunstein

ThinkMarkets

by Mario Rizzo

The New York Timesmagazine has an interesting, if somewhat uncritical, article on Cass Sunstein, the Obama regulation czar. The “best” part is the section about me:

Some scholars dislike the strong, if subtle, governmental hand that is embedded in this last proposal. It seems more forceful than a nudge. “Once you get to a point where you have automatic enrollment, you raise the question, What kind of fund?” Mario Rizzo, a professor of economics at New York University, says. “The problem is that if you were enrolled automatically, you could complain later that you’d been put into either a too-risky or a too-conservative fund. So then you micromanage that and you say you have to have a balanced fund. But pretty soon you’re on a slippery slope, where you’re dictating people’s retirement choices.” Rizzo told me about an academic study of gift-giving that found that most people…

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@GarethMP @jamespeshaw need message discipline on @NZGreens as honest brokers

Yesterday morning, Green MP Gareth Hughes posted a British Greens’ video about how other politicians are a bunch of squabbling children but the Greens are above that. It’s only the Greens who offer a “true alternative to the establishment parties” and their “same childish Punch & Judy politics”.

Later that same day Greens co-leader James Shaw posted a video that shaded the truth about the history of dividends from Kiwibank as a way of scoring points of the National Party led government.

Shaw claimed that the government is extracting more and more dividends from Kiwibank rather than letting it keep those profits as capital on which the government owned bank can be a more aggressive competitor.

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Source: Kiwibank pays its first dividend of $21 million to Government | Stuff.co.nz.

Shaw is vaguely correct in that it is dividends plural when referring to Kiwibank’s dividends. Kiwibank paid dividends of $21 million last year; and $750,000 the year before. Kiwibank has paid two dividends to New Zealand Post in its entire history since 2002.

It shades the truth to say that the government is extracting more and more dividends from Kiwibank when when it has only paid one dividend worth mentioning, which was last year.

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Source: New Zealand Treasury – data released under the Official Information Act.

As for James Shaw’s claim that the entry of Kiwibank made banking in New Zealand much more competitive, Michael Reddell disposed of that by linking to a 2013 Treasury assessment of competition in retail banking.

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Source: New Zealand Treasury Official Information Act Releases.

There are no excess profits in the New Zealand banking market for Kiwibank to undercut. Entry barriers are low, banking products are easy substitutes for each other between the competing banks, and the banks compete for market share by advertising  of, for example, special packages to switch banks.

Adding to the analysis of the Treasury, Posner and Easterbrook suggest that these industry behaviours together are suspicious.

  1. Fixed relative market shares among top firms over time.
  2. Declining absolute market shares of the industry leaders.
  3. Persistent price discrimination.
  4. Certain types of exchanges of price information.
  5. Regional price variations.
  6. Identical sealed bids for tenders.
  7. Price, output, and capacity changes at the time of the suspected initiation of collusion.
  8. Industry-wide resale price maintenance or non-price vertical restraints.
  9. Relatively infrequent price changes; smaller price reactions as a result of known cost changes.
  10. Demand is highly responsive to price changes at market price.
  11. Level and pattern of profits relatively favourable to smaller firms.
  12. Particular pricing and marketing strategies.

As the Treasury noted in its analysis, there are several small banks offering competitive rates that would allow them to expand if they offered value for money over the existing offerings. Returns on equity of the big banks are not discernibly higher than for the smaller ones.

To add again to the Treasury analysis, it is not easy to organize a cartel. There are markets to divide, prices to set, and production quotas to assign. The best place to be in a cartel is outside of it undercutting the higher price and selling as much as you can before the cartel inevitably collapses. Brozen and Posner suggest the following pre-conditions to collusion:

  • market concentration on the supply side;
  • no fringe of small sellers;
  • high transport costs from neighbouring markets;
  • small variations in production costs between firms;
  • readily available information on prices;
  • inelastic demand at the competitive price;
  • low pre-collusion industry profits;
  • long lags on new entry;
  • many buyers (otherwise selective discounting to big buyers will be too tempting while monitoring adherence to the agreement will be difficult);
  • no significant product differentiation;
  • large suppliers selling at the same level in the distribution chain;
  • a simple price, credit and distribution structure;
  • price competition is more important than other forms of competition;
  • demand is static or declining over time; and
  • stagnant technological innovation and product redesign.

Stable collusive arrangements are thus likely to be rare because the absence of any of the above conditions will tend to undermine the potential for successful collusion.

Successful cartel operation is even harder than its initial formation. Members of the cartel must continue to believe that they enjoy net profits from participating in the collusion.

The more profitable the collusive price fixing, the greater the incentive for outsiders to seek entry to compete. In cartel theory, these new entrants are known as interlopers.

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The more numerous the participants in the cartel and the more lucrative the collusion, the greater the temptation for individual members to cheat and the greater the fear of each that some other member will cheat first.

Cartel members that cheat early profit the most from the cartel price before it collapses. That is why the history of cartels is a history of double-crossing. Long-term survival of the cartel has two fundamental requirements:

  1. cheating by a member on the cartel prices, outputs and market shares must be detectable; and

  2. detected cheating must be adequately punishable without breaking-up of the cartel.

If banking was a cartel, you would not see advertising on the TV every night inducing customers to switch but you do. That advertising is cheating on the banking cartel the New Zealand Greens want to break up.

There is an infallible rule in competition law enforcement. It arises mostly crisply in merger law enforcement. If competitors oppose a merger, the merger must be pro-consumer. If the merger is anti-competitive, that merger will increase prices. The competing firms can follow those prices up and profit from the weakening of competition subsequent to the merger.

Latin America is becoming richer and less unequal

Bjorn Lomborg: How to fix global warming smartly

The Non-Non-Libertarian FAQ

Nintil

The Non-Non-Libertarian FAQ

aka The webpage you will always remember for changing your political views, maybe 🙂

Contents

0. Introduction

A. Economic Issues

1. Externalities
2. Coordination Problems
3. Irrational Choices
4. Lack of Information

B. Social Issues

5. Just Desserts and Social Mobility
6. Taxation

C. Political Issues

7. Competence of Government
8. Health Care
9. Prison Privatization
10. Gun Control
11. Education

D. Moral Issues

12. Moral Systems
13. Rights and Heuristics

E. Practical Issues

14. Slippery Slopes
15. Strategic Activism
16. Miscellaneous and Meta

Epilogue


Introduction

0.1: Who are you, what is this?

For me, see in the About section of this site.

This is a response to Scott Alexander’s Non-Libertarian FAQ, initially written in 2010 and revised in 2013. Note that his FAQ is not called the Anti-Libertarian FAQ. In the same spirit, this FAQ does not defend libertarianism, but criticises arguments offered against libertarianism.

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NOT A LOT OF PEOPLE KNOW THAT

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