McCloskey explains Modern Economic Growth

#MiltonFriedman on comparative institutional analysis

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Yes Prime Minister on a minister of manufacturing @jamespeshaw @julieannegenter

 

Tullock vindicated by how the Romanian revolution succeeded

The obituaries today for Victor Stanculescu, the Romanian army chief at the time of the 1989 revolution, vindicated Gordon Tullock’s view that popular revolutions are in fact military coups.

Tullock argues that any dictator can survive popular revolts as long as he has

  • a secret police that is moderately competent and willing to torture and kill; and
  • offers large rewards for informing on members his own entourage plotting to overthrow him.

Ordinary citizens obey dictators because if they don’t, they are highly unlikely to make any difference in any revolt and could get killed during the uprising even if it succeeds. Worse awaits them if the revolt fails.

Most dictators do not anoint a formal successor while they are in office. Tullock argued that as soon as a likely successor emerges, loyal retainers start to form alliances with that person and may see private advantage in bringing his anointed day forward. 

More than a few autocrats were murdered in their sleep. To his very last day, Stalin locked his bedroom door because he did not trust the bodyguards who had been with him since the 1920s.

The role of street protests in the Arab Spring was to throw in the possibility of mutinies and desertions in the army and police. Previous alliances are thrown into doubt especially as the autocrat is old and sick, but had for many years grooming his 39 year-old son to inherit power.

Turning back to the Romanian revolution, Victor Stanculescu was the recently appointed army chief and initially stuck by the regime. He ordered the troops to open fire on protesters and at least 1000 died from in the shootings in the street.

In common with the Arab Spring, a large street protest did led him to reconsider his position:

Sniffing Mr. Ceausescu’s defeat, General Stanculescu quickly returned to Bucharest, where he faked a broken leg to avoid further counterrevolutionary deployment. Promoted to defense minister after the incumbent minister killed himself, he helped Mr. Ceausescu and his wife, Elena, flee by helicopter from the roof of party headquarters.

But fearing that the copter had been spotted by radar and would be shot down, the pilot hastily landed. Mr. Ceausescu hijacked a passing car, but he and his wife were soon surrounded and arrested.

After the couple were captured, General Stanculescu organized their trial by a military court and recruited the firing squad (before the verdict, by some accounts) that executed them on Christmas Day. He then joined the new government.

But for this late switch by the army chief, the popular revolt would never have succeeded. The army was needed to put down the still loyal security police. The army chief’s top priority was to execute Ceausescu as quickly as possible so that he was not a rallying point for a counter coup.

Ceausescu found out that his game was up when who he thought was his still loyal army chief arrived at his hideout with military judges to try and execute him.

About 10 years later, the Romanian government turned against the man who made the revolution and put him in prison for the many deaths in the street when he was on the side of the regime putting down the revolt.

Not so good an idea. A little bit of forgiveness carries a lot of weight encouraging late switching within the ruling elite and army that makes the difference to bringing down the old regime.

The Economist Crony Capitalism Index

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Nitpicking @stevenljoyce reply 2 @TaxpayersUnion on corporate welfare @JordNZ

The best the Minister for Economic Development, Steven Joyce, could do in response to my recent report on corporate welfare was nit-picking. Joyce said my definition of corporate welfare was flawed and that spending on R&D will grow the economy. He said

“To brand things like tourism promotion and building cycle-ways as corporate welfare is, I think, creative but not accurate at all.”

Joyce also said my report was

just somebody picking out a whole bunch of government programmes that in many cases don’t involve payments to firms at all…

Those that do involve payments to firms are specifically designed to encourage the development for example of the business R&D industry. Politicians don’t choose them.

Payments in kind are business subsidies. R&D is so important to the economy that the last thing you want is its direction to be biased by funding from government. Bureaucrats have a conservative bias and do not fund oddballs and long shots. The oddballs and hippies in the picture below could only afford the photo because they won a radio competition in Arizona.

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The R&D expenditure that was criticised in my report was commercialisation, not basic research, which was specifically praised. Which research to commercialise is for entrepreneurs.

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There is no reason whatsoever to think bureaucrats administering R&D subsidy budgets set by politicians are any better than private entrepreneurs at picking the next big thing.

If bureaucrats were any good at picking winners, were any good at beating the market, they would go work for a hedge fund on an astronomically better salary package. The salary package of one top hedge fund manager exceeds the entire payroll budget of most New Zealand government departments including those administering R&D subsidies and other hand-outs.

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Government expenditure in vital areas such as innovation should be justified on the basis of cost-benefit ratios and a rationale for why bureaucrats have superior access to information about the entrepreneurial prospects of unproven technologies and product prototypes. 

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Subsidies should not be defended because of their popularity and sexiness as Mr Joyce did for the film industry, tourism promotion and ultra-fast broadband

If they told New Zealanders that in their view tourism promotion should be cancelled, the film industry should close down, that their shouldn’t be any ultra-fast broadband…I don’t think people would be that enamoured with it.

On irrigation funding, Mr. Joyce cited a report by NZIER that found irrigation contributes $2.2 billion to the economy. Irrigation is a private good which can funded by pricing it properly including the recovery of capital costs. There is no case for a subsidy.

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Public goods have spillovers, private goods such as water and irrigation do not. Users can fund the irrigation themselves buying as little or as much water as they are willing to pay out for out their own pockets. The NZIER report noted that it was not about the case for public funding:

… we are not able to quantify the environmental or social impacts if irrigation had never occurred. We also do not attempt to investigate the relative merits of public versus private sector funding of the schemes.

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In the hours after planes hit WTC, largest maritime evacuation in history took place

HT: Pete Boettke

Deirdre McCloskey: What are the biggest misunderstandings about capitalism?

Patrick Minford explains ‪#‎Brexit‬

Mises on the Fatal Conceit

Source: Unicorn Governance | Foundation for Economic Education.

Adam Smith and the Follies of Central Planning

Hayek Lecture 2016: Price Stability and Financial Stability without Central Banks

Expressive voting, more gun control or fewer gun free zones

https://twitter.com/Thomas_Conerty/status/649800146528563200

If you want fewer mass shootings, reduce the supply of gun free zones where even the craziest gunmen have been able to find despite being tormented by the voices as John Lott explains

Time after time, we see that these killers tell us they pick soft targets. With just two exceptions, from at least 1950, the mass public shootings have occurred in these gun-free zones. From last summer’s mass public killers in Santa Barbara and Canada, to the Aurora movie theatre shooter, these killers made it abundantly clear in their diaries or on Facebook how they avoided targets where people with guns could stop them.

And even when concealed handgun permit holders don’t deter the killers, the permit holders stop them. Just a couple of weeks ago, a mass public shooting at a liquor store in Conyers, Ga., was stopped by a concealed handgun permit holder.

The USA is in an arms race between criminals and law-abiding citizens. Both have lots of guns so the only people who gain from disarmament to those who obey the law to have fewer guns. They are in a high gun equilibrium where it very difficult to get out of this arms race.

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Demands for more gun control and bans on specific weapons postpone the hard work of how to reduce mass shootings in a society with easy gun access. It is expressive politics at its worse.

An Australian politician today in an unrelated context regarding universal health insurance in Australia called Medicare made this point about politics is hard work, not political theatre

It’s so much easier today to be a cynical poseur than a committed democrat, it’s easier to retreat to observer status than convince your friends of the merits of incremental change.

It required hard slog to ensure those institutions could survive the heat of adversarial politics. Then it took election campaign after election campaign, tough political negotiation, administrative effort, and the making and breaking of careers and governments to finally make Medicare stick,” she said.

The creation of Medicare took more than a hollow-principled stand, it took more than just wishful thinking, it took more than slogans, it took more than protests. It took real, tough politics. It took idealists who were prepared to fight to win government.

Expressive politics is about what voters boo and cheer, not whether policies actually work if adopted. Voters want to feel good about what they voted for and find a sense of identity in who they oppose and what they support. After a mass shooting, voters feel they must do something, cheer for something better and cheering for more gun control is an easy way to feel better.

Gun control is not going to happen in the USA because of the poor incentives for law-abiding individuals to retreat from high levels of legal private gun ownership when criminals will keep their guns. Harry Clarke pointed out that:

The political popularity of guns is strengthened by Prisoner’s Dilemma disincentives for individuals to retreat from high levels of gun ownership.

Accepting a gun buyback would be unattractive to citizens who would recognize high levels of overall gun ownership in the community and, hence, their own personal increased vulnerability if those with criminal intent acted rationally and kept their weapons.

If you want fewer mass shootings, fewer gun free zones is the way to go. That might have other  unintended consequences but more mass shootings is not likely to be one of them. Ready access to guns in moments of despair increases suicide rates. Suicides in the Israeli Defence Force fell 40% when young soldiers were not allowed to take their guns home at the week-end. Suicides do not increase during the week so the lack of weekend access to guns got them through dangerous moments of despair where ready access to a firearm would have led to a suicide.

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The last thing spree killers want is to be quickly shot down like the dogs they are such as at an American church in 2007. The last wannabe jihadist to try it on in Texas died in a hail of gunfire.

The U.S. Department of Justice’s National Crime Victimization Survey showed the risk of serious injury from a criminal attack is 2.5 times greater for women offering no resistance than for women resisting with a gun. 97% of murders are by men. Any arguments about gun control should be about gun control for men.

The sharemarket perception of gun control is every time there are calls for more gun controls, the share prices of gun manufacturers surge of the back of an anticipated spike in sale. Buying two gun shares on the first trading day after 12 recent mass shootings and selling them 90 days later produces a return of 365% over a nine-year period compared to 66 percent for the S&P 500 Index. A buy-and-hold bet on Smith & Wesson stock starting in January 2007returns 137%.

The key to the success of Australian and New Zealand gun laws was low levels of gun crime and minimal use of guns for self-defence. There was no arms race as compared to the USA where criminals and civilians are both armed. It is easy to control an arms race that has not started. The New Zealand, Australian and even the British police rarely have to discharge their weapons.

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Martin Luther King was a gun owner for obvious reasons. Tom Palmer was the lead litigant in the recent Supreme Court case on gun control in the USA. He saved himself and a fellow gay man from a severe beating in 1987 by gang of 20 men by pulling a gun on them. Pink pistols has been in the thick of anti-gun control litigation in the USA.

Ronald Coase on good regulation

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Deirdre McCloskey on the Nirvana fallacy in public policy

Source: Quotation of the Day… – Cafe Hayek.

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