Two charts about the future of newspapers
20 Jun 2014 Leave a comment
in economics of media and culture, entrepreneurship, technological progress Tags: creative destruction
The Peak Whale Oil Theory | Coyote Blog
18 Jun 2014 Leave a comment
in energy economics, entrepreneurship, environmental economics Tags: peak oil
As the US Population reaches toward the astronomical total of 40 million persons, we are reaching the limits of the number of people this earth can support. If one were to extrapolate current population growth rates, this country in a hundred years could have over 250 million people in it! Now of course, that figure is impossible – the farmland of this country couldn’t possibly support even half this number. But it is interesting to consider the environmental consequences.
Take the issue of transportation. Currently there are over 11 million horses in this country, the feeding and care of which constitute a significant part of our economy. A population of 250 million would imply the need for nearly 70 million horses in this country, and this is even before one considers the fact that “horse intensity”, or the average number of horses per family, has been increasing steadily over the last several decades.
It is not unreasonable, therefore, to assume that so many people might need 100 million horses to fulfil all their transportation needs. There is just no way this admittedly bountiful nation could support 100 million horses. The disposal of their manure alone would create an environmental problem of unprecedented magnitude.
Or, take the case of illuminant. As the population grows, the demand for illuminant should grow at least as quickly. However, whale catches and therefore whale oil supply has levelled off of late, such that many are talking about the “peak whale” phenomena, which refers to the theory that whale oil production may have already passed its peak. 250 million people would use up the entire supply of the world’s whales four or five times over, leaving none for poorer nations of the world.
The real beauty of this free-market price system is that it brings about its own kind of sustainability
17 Jun 2014 Leave a comment
in energy economics, entrepreneurship, environmental economics Tags: peak oil
This is not so much sustainability in the use of particular resources — for particular goods fall in and out of favour according to supply and demand factors — but sustainability of high economic growth and high standards of living in the economically developed, capitalist economies.
Take, as an example, the transition in the market for interior illumination: tallow candles were replaced by whale-oil lamps, which were replaced by kerosene lamps, which were replaced by incandescent bulbs powered by electricity.
There was no social or political pressure needed to accomplish this evolution; there was no “peak whale oil” movement, no kerosene conservationists, no sustainability crusade of yore. All it took was a functional price system, combined with the ever-present entrepreneurial drive for profits under a competitive, free-market order.
Cancelling a digital subscription to The Australian is a complicated process
12 Jun 2014 Leave a comment
I had to call Sydney from New Zealand via telephone to cancel my online subscription.
Their online My Account has no cancel button nor any instructions on how to cancel the account.
When you try and send them a message through their online enquiry form, they tell you to phone number in Sydney.
Got that off my chest now.
Why governments cannot pick winners
11 Jun 2014 Leave a comment
in applied price theory, entrepreneurship, financial economics Tags: efficient market hypothesis, hedge fund managers, picking winners, The fatal conceit, The pretence to knowledge
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The salary of one top hedge fund manager exceeds the entire payroll of any of the government departments in New Zealand. To get on the list of top 25 hedge fund manager you must earn at least $300 million a year. The best of these earned $3 billion last year. Anyone who was any good at picking the share market would certainly not accept government wages. Government employees have neither the aptitude nor the taste for risk that betting it all every day and losing everything perhaps requires. |
The market process picks unusual winners
10 Jun 2014 Leave a comment
in entrepreneurship, industrial organisation, international economics, Public Choice, rentseeking Tags: picking winners
What World Bank consultant would risk his fee and return business on advising Egypt to specialise in the export of toilets to Italy? But Egypt’s largest single manufacturing export is toilets to Italy where it captured 93% of the market.
Kenya has a booming export business in cut flowers for men to buy for their wives. Kenya has 40% of the European markets for cut flowers. Nigeria has 84% of the Norwegian market for floating docks. The Philippines has 71% of the global market for electronic integrated circuits.
What development expert would have picked these winners? They’re far too far away from the conventional wisdom and the safe bets that are behind picking winners in government circles.
Picking winners by governments requires heroic assumptions not only about the information politicians and bureaucrats have about the present and their ability to predict the future, but also about their motivations and their ability to resist capture by special interests. The Economist explains:
None of these studies addresses a deeper problem with the way industrial policy tends to develop over time.
Earlier efforts have tended to degenerate into rent-seeking, lobbying and cosy deals between incumbent firms and bureaucrats, stifling innovation and the process of creative destruction.
The problem, of course, is that … industrial policy requires disinterested, benevolent policymakers who can do it well. Unfortunately, they do not yet have a recipe for how such policymakers can be created.
Policy is made by real people with political and personal motivations. What they come up with is unlikely to be as well designed as the ones in the models.
The Social Possibilities of Economic Chivalry (1907)
10 Jun 2014 Leave a comment
in Alfred Marshall, entrepreneurship, industrial organisation Tags: moral hazard, The fatal conceit, The pretense to knowledge
A Government could print a good edition of Shakespeare’s works, but it could not get them written…
I am not urging that municipalities should avoid all such undertakings without exception. For, indeed, when a large use of rights of way, especially in public streets, is necessary, it is doubtless generally best to retain the ownership, if not also the management, of the inevitable monopoly in public hands.
I am only urging that every new extension of Governmental work in branches of production which need ceaseless creation and initiative is to be regarded as prima facie anti-social, because it retards the growth of that knowledge and those ideas which are incomparably the most important form of collective wealth.
The mismeasurement of prosperity
07 Jun 2014 Leave a comment
in applied welfare economics, development economics, entrepreneurship, growth miracles Tags: longevity, mismeasurement, prosperity
The average quality of goods: new goods and improved versions of older goods can provide variety and entirely new products and services previously unavailable at any price.
Measurement of the impact of new goods is ‘pretty much guesswork at present’ and ‘some very large gains in consumer welfare’ may be missed (Moulton 1996, p. 173).
An important bias affecting the measurement of prosperity is greater longevity.
The life expectancy of males at birth improved by 5.9 years between 1970-72 and 1995-97, and by another 3.6 years by 2005-2007 (Statistics New Zealand 2009a). Life expectancy of males at birth increased by a mere 1.3 years from 1950-52 to 1970-72!
Becker et al. (2005) estimated that the six year increase in New Zealand life expectancy between 1965 and 1995 amplified the 34.3 per cent increase in New Zealand GDP per capita to the income equivalent of a 47.3 per cent rise. Becker et al. (2005) estimated that the 73.5 per cent rise in Australian GDP per capita between 1965 and 1995 was enhanced to 95.5 per cent after adjustment for the seven year increase in life expectancy.
Reality television programmes are common-place using the large differences in even 20th century living standards as their theme. The latest niche targeting younger audiences is programmes about the technological backwardness of the 1970s and even the 1980s.
Is Thomas Piketty a double secret supply-side economist?
03 Jun 2014 Leave a comment
in entrepreneurship, labour supply, public economics Tags: laffer curve, supply-side economics, Thomas Peketty
When a government taxes a certain level of income or inheritance at a rate of 70 or 80 percent, the primary goal is obviously not to raise additional revenue (because these very high brackets never yield much).
It is rather to put an end to such incomes and large estates, which lawmakers have for one reason or another come to regard as socially unacceptable and economically unproductive…
Piketty: A Wealth of Misconceptions by Don Boudreaux
01 Jun 2014 2 Comments
in applied price theory, applied welfare economics, economic growth, entrepreneurship, human capital, labour economics, labour supply Tags: inequality and poverty, Piketty, seen and unseen, The Great Enrichment, The Great Fact
Piketty’s method of doing economics involves frequent grand proclamations about "social justice" and economic "evolutions," but he offers no analyses of the dynamics of individual decision-making, often referred to as "microeconomics," that should be central to the issues he raises…
Revealingly, Piketty writes of income and wealth as being claimed or "distributed," never as being earned or produced. The resulting statistics are too aggregated—too big-picture—to reveal what is happening to individuals on the ground…
He imagines that such aggregates interact in robotic fashion through a logic of their own, unmoved by individual human initiative, creativity, or choice…
If we follow the advice of Adam Smith and examine people’s ability to consume, we discover that nearly everyone in market economies is growing richer…
THE U.S. IS THE bête noir of Piketty and other progressives obsessed with monetary inequality.
But middle-class Americans take for granted their air-conditioned homes, cars, and workplaces—along with their smartphones, safe air travel, and pills for ailments ranging from hypertension to erectile dysfunction…
At the end of World War II, when monetary income and wealth inequalities were narrower than they’ve been at any time in the past century, these goods and services were either available to no one or affordable only by the very rich.
So regardless of how many more dollars today’s plutocrats have accumulated and stashed into their portfolios, the elite’s accumulation of riches has not prevented the living standards of ordinary people from rising spectacularly…
Piketty’s disregard for basic economic reasoning blinds him to the all-important market forces at work on the ground—market forces that, if left unencumbered by government, produce growing prosperity for all. Yet, he would happily encumber these forces with confiscatory taxes.
Olympic Happiness: Better to win Bronze than Silver Medals?
23 May 2014 Leave a comment
in entrepreneurship, health and safety, labour economics
Olympic Happiness: Better to win Bronze than Silver Medals? | Psychology Today.
The bronze winner is happy as Larry looking at all those losers that won nothing.
The silver medal winners came second. At least they know that their mum will remember their great day when they almost made it. A 1924 silver medal winner was still brooding about it in his 80s.
Warren Buffett: I Build Wind Turbines To Lower My Taxes
22 May 2014 Leave a comment
in entrepreneurship, environmental economics, taxation Tags: bootleggers and baptists, rentseeking, wind power
“I will do anything that is basically covered by the law to reduce Berkshire’s tax rate,” Buffett told an audience in Omaha, Nebraska this weekend. “For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”
Buffett has invested billions into wind power to get federal subsidies.
via Warren Buffett: I Build Wind Turbines To Lower My Taxes | The Daily Caller.
The next time you make an allegation of price fixing
15 May 2014 Leave a comment
in entrepreneurship, industrial organisation, law and economics, Richard Posner Tags: cartels
Remember this, firms are only likely to collude in certain market environments.
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; the absence of any of the conditions will tend to undermine the potential for successful collusion.
Super-Economy “pre-reviewed ” Piketty in 2010
14 May 2014 Leave a comment
in applied welfare economics, entrepreneurship, labour economics, liberalism, politics - USA, technological progress Tags: Piketty, poverty versus inequality
The French are poorer that the 3rd poorest American state: Arkansas. The EU-15 as a whole would qualify to be the 49th poorest American state.
The rich in Europe are poor by American standards. The poor in the USA are middle class by European standards. The European middle class has smaller houses, few cars and few consumers durables that the average poor in the USA.
via Super-Economy: Dynamic America, Poor Europe and Tino Sanandaji
Utopia, you are standing in it! 
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