How does @MontPelerinSoc rule the world from such a crappy website?

You would think the global ringmaster of the neoliberal conspiracy would scrape off enough labour surplus to have a decent website. How are its minions to know want to do in this age of social media if they cannot even download the papers delivered at recent meetings?

Mind you, in Australia, the local ringmaster of the vast Mont Pelerin conspiracy that ruled the roost in public policy making in Canberra in the 1980s, which John Quiggin outed as the Centre for Independent Studies, did not have a full time staff member until about 1979: Greg Lindsey. Their 1st office opened above Uncle Pete’s Toys in St Leonards in 1980.

Build More Housing! San Francisco’s YIMBY Movement Has a Plan to Solve the City’s Housing Cris

The Vision of Jeffrey Sachs by Bill Easterly

.@JeremyCorbyn was on Iranian state TV’s payroll

The Iranian street protests will come to nothing, sadly in coup proof Iran

Gordon 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.

For Tullock, the puzzle is not that popular revolutions are so rare, but that they happen at all.


Iran also follows the basic rules of coup proofing an autocratic regime:

These include effectively exploiting family, ethnic, and religious loyalties; creation of an armed force parallel to the regular military; development of multiple internal security agencies with overlapping jurisdiction that constantly monitor one another; fostering of expertness in the regular military; and adequately financing such measures. The regime is thus able to create an army that is effectively larger than one drawn solely from trustworthy segments of the population. 

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.

Pakistan has plenty of military coups. By comparison, India does not have a commander-in-chief of the Army who is a military officer. There are 3 service chiefs and countless paramilitary and border forces all vying for importance and subject each to direct ministerial control.

The role of street protests in the Arab Spring and now in Iran is 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 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.

Autocrats are fundamentally insecure. Wintrobe wrote of the “Dictator’s Dilemma” – the problem facing any ruler of knowing how much support he has among the general population, as well as among smaller groups with the power to depose him.

Most dictators are overthrown by the higher officials of their own regime. In common with the Arab Spring, a large street protest did led General Stanculescu 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.

As for the populace, the autocrat must use both the carrot and the stick to buy loyalty. It is tricky to get the right mix of repression and co-optation due to lack of information. So dictators pay very high wages to select groups to secure their loyalty, especially the military and police. The communist party of the USSR started with 100,000 members in 1920. By the early 1980s, co-optation left it with 26 million members with the ensuing privileges.

Perfectly ordinary regular armed forces, with no counterinsurgency doctrine or training whatsoever, have in the past regularly defeated insurgents by using well-proven methods.

The simple starting point is that insurgents are not the only ones who can intimidate or terrorise civilians. For instance, whenever insurgents are believed to be present in a village, small town, or city district, the local notables can be compelled to surrender them to the authorities, under the threat of escalating punishments, all the way to mass executions. That is how the Ottoman Empire controlled entire provinces with a few feared janissaries and a squadron or two of cavalry.

Terrible reprisals to deter any form of resistance were standard operating procedure for the German armed forces in the Second World War. Compare occupied France with the U.S. in Iraq:

  • German officers walked around occupied France with no more than side-arms because any mischief would be dealt with by savage reprisals.
  • American forces in Iraq bunker down and move in convoys because they do not launch reprisals.

On the side-lines, even better, watching it all on TV is the safest place for most to be in a popular revolution, uprising or insurgency.

Unless you control key military resources in the capital, what you do personally does not matter to the success of the revolution. Sticking your neck out can get you shot at or perhaps tortured. A classic ‘free rider’ dilemma. If you must get involved, the best place to be in a mounting revolution is to be a ‘late switcher’. Switch sides when you are sure of joining the winning side. Back the winner just as he is about to win.

One reason for those post-revolution and post-coup purges is the small number of people actually involved in overthrowing the old autocrat and who actually stuck their necks out while plotting the coup do not trust their Johnny-come-lately new allies. They turn on these late-switchers before they change sides again to support a further coup of their own or a counter-coup.

People power in Manila in 1986 had a lot to do with late switching in a coup plot. Originally, a military coup was planned by General Ramos and Defence Minister Enrile against the dying Marcos. The coup plotters feared for their lives under Imelda. The plot was uncovered. Assassins were dispatched.

Ramos and Enrile gave up on forming a military junta and threw their lot with Cory Aquino and her popular movement in the hope that the army would split or hold off until the lay of the land was clearer, which the army did. That 1986 military coup and the coup attempts in succeeding years were staffed by different cabals of these late switchers.

Yeltsin on that tank in Moscow with a loud hailer was great TV, but remember he was calling for the army and security forces to switch sides or at least stay neutral. They did.

The mid-1980s Russian leaders were old and sick, so many ambitious younger army officers and nomenklatura saw their main chance if they boxed real clever and switched sides just at the right moment.

After every change of leadership in the USSR, there is a redistribution of patronage. Perestroika and Glasnost were, on closer inspection, another round of these reallocations of patronage. Patronage to their own entourages are routine for new autocrats throughout history.

It also should be always remembered that Qadaffi got his main chance to take over when he was a mere Colonel Qadaffi leading a small group of junior officers. Colonels control strategic components of the military but are not as well paid as those in the autocrat’s inner circle.

Generals are often close to the leadership; their appointments are usually somewhat political and benefit from generous patronage from the autocrat. They have little to gain but their life to lose in a coup plot.

Enough military coups are led by more junior officers seizing their main chance. This make their generals nervous enough about their own survival in a colonels’ coup to strike first and displace the current autocrat before they are the next to be arrested and share his fate. There is then a post-coup realignment of patronage to buy off the junior officers.

Nasser did not believe that he, as a lieutenant-colonel, would be accepted by the Egyptian people and so he and the Free Officers Movement selected a general to be their nominal boss and lead the coup in 1952. Nasser did not become Prime Minister until 1954 after a spell as a minister and then as Deputy Prime Minister.

What appears to be a popular uprising is normally a split within the government. The Arab Spring, not by coincidence, occurred during a succession crisis in Egypt. President Mubarak has been very old and sick for a long time. Gamal Mubarak was old enough to covet the presidency but would have a large entourage of his own that would take many of the lucrative posts from his father’s retainers and courtiers.

The street protests in Iran are unlikely to succeed because there is no succession crisis within the regime and therefore no jockeying for power among the many factions in the regime who control parts of the military forces, paramilitary forces such as the revolution regard and police.

Moral superiority is the payoff of righteous outrage. No surprise there.

Firing Line with William F. Buckley Jr.: Presidential Hopeful: Ronald Reagan

Firing Line with William F. Buckley Jr.: What Have We Learned from the Failure of British Socialism?

Thatcher on Consensus vs Conviction

There are no externalities from hosting the America’s Cup because externalities arise from incomplete property rights

Externalities arise out of incomplete property rights. The only externalities that arise from an airport expansion proposed in Wellington is from noise.

There are no externalities from building sports stadiums or hosting mega sports events because all of the effects are transacted through the market. No inputs are used without the permission of the owner, nothing is produced that is not charged for by the venue or event organisers.

As for the use of benefit cost analysis to strengthen the claim for a government subsidy, you use cost benefit analysis when you are too stupid to charge for the good or service such as a road or you are evaluating regulations because they deal with nonmarket effects, effects that are not mediated through the market process.

Sports stadiums and mega sports events should pass the usual market test. Is it profitable for the entrepreneurs backing the project when they are using their own money.

#OTD USSR broke up

Tyler Cowen spot on about the words evidence-based; my views precisely

From http://marginalrevolution.com/marginalrevolution/2017/12/seven-forbidden-words.html

 

Speaking of modesty feminism

Net neutrality must be anti-competitive! @GarethMP favours net neutrality

Netscape shipped its first browser for the friendly price of $49. Nasty anti-competitive Microsoft started giving Internet Explorer away. After the first browser war, the usage share of Netscape had fallen from over 90 percent in the mid-1990s to less than one percent by the end of 2006.

During the 1990s, Microsoft competitors — Netscape, IBM, Sun Microsystems, WordPerfect, Oracle, and others —pressed the Justice Department to sue Microsoft for tying Internet Explorer to Windows even though only one of them, Netscape, had a browser.

The demise of Netscape was a central premise of Microsoft’s antitrust trial, where the Court ruled that Microsoft’s bundling of Internet Explorer with the Windows operating system was a monopolistic and illegal business practice. We are still waiting for the day when Microsoft finishes giving away its browser, excludes competition from the market for browsers, jacks up its price to make up for a good 20 years of giving away its browser and is not immediately threatened by new entry.

As William Shughart and Richard McKenzie observed:
Microsoft’s critics have advanced a number of economic theories to explain why the firm’s behaviour has violated the antitrust laws. None of those critics has articulated why or how consumers have been harmed in the process. Instead, the furious attacks on Microsoft have focused on the injuries supposedly suffered by rivals (on account of Microsoft’s pricing and product-development strategies) and by computer manufacturers and Internet service providers (on account of Microsoft’s “exclusionary contracts”).

A simple rule for a complex world: the moment that evidence is tended to a court about what happened to the competitors in a lawsuit under competition law, that court must dismiss the suit out of hand. Too many lawsuits under competition law are designed to protect the consumer from the scourge of lower prices!

The best proof that a merger or other business practice is pro-consumer is the rival firms in that market are against it. Why would a firm be against a merger or other business practice that raises the prices of their business rivals?

The fear with net neutrality is price discrimination. That someone else is getting a discount you are not. The scourge of lower prices once again is the great bugbear of competition law.

Industries with high fixed costs and low marginal costs often have a menu of prices. Remember that the next time you get on a plane.

The predecessor of net neutrality was the battles over the pricing of the local exchanges in the telephone industry but as Richard Epstein observed:

In the long run, the rapid movement of technology has already left us with a new and vibrant landscape that is light years removed from a generation ago when the major premise of the Telecommunications Act of 1996 was that landlines would continue to hold a monopoly position for years to come—about two years, in fact. That false premise led to extensive regulatory battles over all the interchange relations between local exchange carriers and long line carriers. But the rise of cell phones and VoIP technology changed all that, so that the regulation did much to hamper innovation, but virtually nothing to protect consumers.

The lessons apply here. It is always a desperate mistake to allow hypothetical horror stories to set the intellectual stage for evaluating regulatory proposals. Quite simply, Slate will be able to access all major networks because no broadband carrier wants to face the consumer wrath and defections that would surely accompany high-handed and intrusive interventions. The correct approach therefore is to do nothing. The FCC need not implement any regulations. For now, it should sit back and relax. If some crisis occurs that merits new forms of internet regulations, we can address that situation when it comes. But for the moment, innovation on the internet is doing great. Let’s keep it that way.

Serial competition is common in rapidly innovating industries with one dominant firm making hay for a while then quickly swept away. Google had the advantage of being the 17th browser to hit the market.

The distribution of firm sizes reflects the rise and fall of firms in a competitive struggle to survive with competition between firms of different sizes sifting out the more efficient firm sizes (Stigler 1958, 1987; Demsetz 1973, 1976; Peltzman 1977; Jovanovic 1982; Jovanovic and MacDonald 1994b). Business vitality and capacity for growth and innovation are only weakly related to cost conditions and often depends on many factors that are subtle and difficult to observe (Stigler 1958, 1987).

The efficient firm sizes are the sizes that survived in competition against other sizes. To survive, a firm must rise above all of problems it faces such as employee relations, skills development, innovation, changing regulations, unstable markets, access to finance and new entry. This is the decisive (and Darwinian) meaning of efficiency from the standpoint of the individual firm (Stigler 1958). One method of organisation supplants another when it can supply at a lower price (Marshall 1920, Stigler 1958).

Regulating innovation through competition law is never a good idea. The more efficient sized firms are the firm sizes that are expanding their market shares in the face of competition; the less efficient sized firms are those that are losing market share (Stigler 1958, 1987; Alchian 1950; Demsetz 1973, 1976). If the firm size distribution in an industry is relatively stable for a time, the firms are their current sizes because there are no more gains from further changes in size in light their underlying demand and cost conditions (Stigler 1983; Alchian 1950; Demsetz 1973, 1976).

Temporary monopoly and rapidly changing market shares with the occasional dominant firm are all characteristics of the early stages of any new or innovating industry. The deadweight social losses from the enforcement of competition law are at their greatest in industries undergoing rapid innovation because of the possibility of error is at its height. Optimum firm sizes continually change over time because of shifts in input and output prices and technological progress (Stigler 1958, 1983).


If large firm size is better at serving consumers, the large firms start to grow and smaller firms will die or be absorbed until the untapped gains from growth in firm size are exhausted. Firms increase in size and decrease in number when this adaptation becomes necessary to survive. If a smaller firm size is now better, smaller firms will multiply and the larger firms will decline in size because they are under-cut on price and quality.

The life cycle of many industries starts with a burst of new entrants with similar products. These new or upgraded products often use ideas that cross-fertilise. In time, there is an industry shakeout where a few leapfrog the rest with cost savings and design breakthroughs to yield the mature product (Jovanovic and MacDonald 1994a; Boldrin and Levine 2008, 2013). Fast-seconds and practical minded latecomers often imitate and successfully commercialise ideas seeded by the market pioneers using prior ideas as knowledge spillovers. Their large market shares are their prizes for winning the latest product races, not the basis of their initial victories.

New entrants regard a large firm size as a premature risk rather than an advantage of incumbency they should mimic as soon as they can. New firms set-up on a scale that is well below the minimum efficient production scale for their industry (Bartelsman, Haltiwanger, and Scarpetta 2009). New entrants choose to start so small to test the waters regarding their true productivity and the market’s acceptance of their products and to minimise losses in the event of failure (Jovanovic 1982; Ericson and Pakes 1995; Dhawan 2001; Audretsch, Prince and Thurik 1998; Audretsch and Mahmood 1994).

Competition law can subvert competition by stymieing the introduction of new goods and the temporary monopoly often necessary to recoup their invention costs and induce innovation. The puzzlingly large productivity differences across firms even in narrowly defined industries producing standard products lead to doubts about the efficiency of some firms, often the smaller firms in an industry. Some firms produce half as much output from the same measured inputs as their market rivals and still survive in competition (Syverson 2011). This diversity reflects inter-firm differences in managerial ability, organisational practices, choice of technology, the age of the business and its capital, location, workforce skills, intangible assets and changes in demand and productivity that are idiosyncratic to each individual firm (Stigler 1958, 1976, 1987; De Alessi 1983).

Harold Demsetz argued that competition does not take place upon a single margin, such as price competition. Competition instead has several dimensions often inversely correlated  with each other. Because of this, a competition law disparaging one form of competition will result in more of another. There are trade-offs between innovation and current price competition. Manne and Wright noted in the paper, Innovation and the Limits of Antitrust that:

Both product and business innovations involve novel practices, and such practices generally result in monopoly explanations from the economics profession followed by hostility from the courts (though sometimes in reverse order) and then a subsequent, more nuanced economic understanding of the business practice usually recognizing its pro-competitive virtues.

A competition law enforcement authority should never pretend to know which trade-off between innovation and price competition and between competition and temporary monopoly are optimal. Every competition authority should simplify the regulatory environment by simply saying lower prices are per always lawful.

It goes back to that extremely famous 1984 essay by Frank Easterbrook on the limits of anti-trust law. The essay was about errors in competition policy and law enforcement:

  • When a competition law enforcer makes a mistake and closes off an efficiency enhancing practice or stops a pro-consumer merger, there are few mechanisms to correct this mistake; and
  • If a competition law enforcer inadvertently does not stop a anti-competitive merger or lets a collusive or inefficient practice get through, at least there is market processes that will slowly chip away at his mistake.

Easterbrook argued that courts and enforcers should craft liability and procedural rules to minimise the sum of competition law’s error and decision costs:

The legal system should be designed to minimize the total costs of (1) anticompetitive practices that escape condemnation; (2) competitive practices that are condemned or deterred; and (3) the system itself

Competition law enforcers and policymakers made plenty of errors in the past. Chastened by their follies aplenty in the past, competition law policymakers should not approach any issue with overconfidence. They have had a dismal track record in aligning competition law with applied price theory and the basics of the economics of industrial organisation. In the high-tech industries, competition law runs a high risk of chilling innovation. As Joshua Wright said:

Innovation is critical to economic growth. Incentives to innovate are at the heart of the antitrust enterprise in dynamically competitive industries, and, thus, getting antitrust policy right in high-tech markets is an increasingly important component of regulatory policy in the modern economy. While antitrust enforcement activity in high-tech markets in the United States and the rest of the world is ever-increasing, there remain significant disputes as to how to assess intervention in dynamically competitive markets.

 

Milton Friedman on the Absurdity of Socialism

Ht: http://cafehayek.com/2017/11/milton-friedman-absurdity-socialism.html#.WgjbtpzAOTo.facebook

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