@NaomiAKlein agrees with #MiltonFriedman on Mancur Olson’s theory of how nations escape institutional sclerosis

Source: quoted by Naomi Klein in “The Shock Doctrine”.

1. There will be no countries that attain symmetrical organization of all groups with a common interest and thereby attain optimal outcomes through comprehensive bargaining.

2. Stable societies with unchanged boundaries tend to accumulate more collusions and organizations for collective action over time.

3. Members of “small” groups have disproportionate organizational power for collective action, and this disproportion diminishes but does not disappear over time in stable societies.

4. On balance, special-interest organizations and collusions reduce efficiency and aggregate income in the societies in which they operate and make political life more divisive.

5. Encompassing organizations have some incentive to make the society in which they operate more prosperous, and an incentive to redistribute income to their members with as little excess burden as possible, and to cease such redistribution unless the amount redistributed is substantial in relation to the social cost of the redistribution.

6. Distributional coalitions make decisions more slowly than the individuals and firms of which they are comprised, tend to have crowded agendas and bargaining tables, and more often fix prices than quantities.

7. Distributional coalitions slow down a society’s capacity to adopt new technologies and to reallocate resources in response to changing conditions, and thereby to reduce the rate of economic growth.

8. Distributional coalitions, once big enough to succeed, are exclusive, and seek to limit the diversity of incomes and values of their membership.

9. The accumulation of distributional coalitions increases the complexity of regulation, the role of government, and the complexity of understandings, and changes the direction of social evolution.

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Source: Obituary: Professor Mancur Olson | Obituaries | News | The Independent

The Economics of Red State vs. Blue State Carbon Politics

1.   My JPAM 2000 paper documents that suburbanites drive more and consume more electricity than urban residents.

2. My 2011 JUE paper documents that center city liberal resident NIMBY zoning regulation has deflected more development to the suburbs where people live a high carbon life (see paper #1 above) and then oppose carbon pricing.

3. My co-authored 2013 JPUBE paper documents that energy intensive manufacturing industries seek out cheap electricity price areas.  Whether U.S carbon pricing and the resulting higher electricity prices would nudge them to move oversees remains an open question.

4.  My co-authored 2012 EER paper documents that more educated people are more likely to have installed solar panels and to go off the grid and thus not pay higher electricity prices.

5. My 2013 EI paper documents that Congress Representatives oppose carbon mitigation regulation when they are conservative, their district is poorer and their district is high carbon.  Nancy Pelosi and Tom Steyer are in liberal, rich, low carbon San Francisco.  There, it is easy to comply with carbon regulation.  They will pay few new costs for such low carbon regulation.

6. My co-authored 2015 JAERE paper documents that even in California and within counties that suburbanites vote against low carbon regulation relative to center city residents. Since we control for the fact that liberals live in center cities, this 3rd variable does not explain the urban form/voting correlation.

7.  In my co-authored 2015 JUE paper we document that U.S protectionism through the Buy America Act has hindered the improvement of our bus fleet as a green technology.

Source: Environmental and Urban Economics: The Economics of Red State vs. Blue State Carbon Politics

Angus Deaton on slow growth as a force for distributional conflict

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Source: ‘Economic growth is the engine of the escape from poverty and material deprivation’ – economist and 2015 Nobel laureate Angus Deaton – AEI | Economics Blog » AEIdeas

@CarlyFiorina says it all on action to fight global warming @jamespeshaw @AndrewLittleMP @garethmorgannz

The bye-bye Biden effect on the Democratic presidential hopefuls

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@SeumasMilne could @jeremycorbyn win?

While standard British Labour Party populist policies resonate with the electorate, all the policies that Jeremy Corbyn brings as a socialist, peacenik and renegade Liberal are deeply unpopular and will be used against him as wedge issues by the Tories.

The popularity of individual policies in the Labour Party manifesto didn’t do them any good at the 2015 general election.

What matters to the voters at the last British general election was that brand Labour was down on the nose. It was not a credible alternative government.

Jeremy Corbyn makes that gap into a chasm because of the vast difference between what his supporters on the left of the Labour Party want and what the voters who must be persuaded to switch their vote for Labour to win in 2020 want as government policies.

Jeremy Corbyn is much further to the left than Ed Miliband, who lost the election in 2015 rather badly because he was too far to the left for the taste of the British electorate.

Ed Miliband was rejected in the 2015 British election because he was not a fiscal conservative nor a credible economic manager. The anti-austerity message loses votes.

There is a yawning chasm between the reasons why the left of the Labour Party thinks their party lost the 2015 British general election and why Labour voters thought they lost the election.

The anti-austerity message was one of the reasons why Labour lost in the eyes of its own voters and would-be voters in the centre of politics

The deep unpopularity of Jeremy Corbyn cannot be understated as a barrier to British Labour winning the next election.

That deep unpopularity of Jeremy Corbyn sacrifices the one winning advantage that British Labour has under Jeremy Corbyn. That advantage is governments tend to lose elections rather than oppositions win them.

Schumpeter disputed the widely held view that democracy was a process by which the electorate identified the common good, and a particular party was then elected by the voters because it was the most suited to carrying out this agreed common good:

  • The people’s ignorance and superficiality meant that they were manipulated by politicians who set the agenda.
  • Although periodic votes legitimise governments and keep them accountable, their policy programmes are very much seen as their own and not that of the people, and the participatory role for individuals is limited.

Schumpeter’s theory of democratic participation is voters have the ability to replace political leaders through periodic elections.

Citizens do have sufficient knowledge and sophistication to vote out leaders who are performing poorly or contrary to their wishes. The power of the electorate to turn elected officials out of office at the next election gives elected officials an incentive to adopt policies that do not outrage public opinion and administer the policies with some minimum honesty and competence.

Power rotates in the Schumpeterian sense. Governments were voted out when they disappointed voters with the replacement not necessarily having very different policies.

The challenge for British Labour is Corbyn cannot win unless he projects minimal competence and stops having policies on defence, foreign affairs and terrorism that outrage public opinion.

Jeremy Corbyn has plenty of outrageous opinions and is yet to show even the most basic competence in running the office of opposition leader, working 24/7 as opposition leader, and showing some ability to win support from members of the Parliamentary Labour Party. If Jeremy Corbyn cannot win votes of his own MPs, what chance do he have with the British people whose interests he claims to champion.

Why does Housing New Zealand pay dividends? @chrishipkins @metiria

The current controversy over payment of dividends by Housing New Zealand is misplaced because of the subtle connections between payment of dividends and greater value for money.

By paying dividends, the investment priorities of Housing New Zealand are subject to additional ministerial scrutiny. Its capital program is scrutinised in greater detail by the Cabinet because ministers must fund it against competing bids across the entire budget and parliamentary scrutiny process.

Each budget bid is championed by a minister, each of whom must make their case every year against all-comers. This annual competition for a central pool of capital filters out lower value investment bids.

If dividends were not paid but were instead retained as free cash flows in the agency, there would be less ministerial scrutiny of Housing New Zealand because it would have a smaller role in annual budget rounds. Ministers and the Parliament sit up and pay attention when money is to be spent, as they should, and the larger is the sum in the budget, the more attention is paid to value for the money sought. Funding projects with retained dividends may reduce ministerial and parliamentary scrutiny.

Payment of dividends does not reduce the ability of Housing New Zealand to engage in new capital spending. If the dividends were not paid, the amount of new capital spending from budget appropriations would be reduced dollar for dollar.

@EricCrampton @KhyaatiA should New Zealand divide into Cantons?

Suggestions by the New Zealand Initiative for regions to be able to ask to be exempt from some national policies was against a background that New Zealand is too small to be a federal state. The New Zealand provinces were abolished in 1876. Switzerland seems to still put bread in the shops despite having many tiny Cantons and half-Cantons.

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Source: Swiss Statistics – Cantons, communes.

So many American states have smaller populations are New Zealand, half in all, that is difficult to present them on a chart. All managed to be richer the New Zealand despite the horrors of federalism or because of it. These small state populations are before considering how much  local government legislative power there is, including taxing and spending powers, city income taxes and city sales taxes, and county and local police forces.

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Source: List of U.S. states and territories by population – Wikipedia, the free encyclopedia.

The median national population size of countries is not much more than New Zealand’s current population.

  • Controlling for location, Easterly and Kraay (2002) found that smaller states were richer than other states in per capita real GDP.
  • Rose (2006) reviewed the impact of size on the level of income, inflation, material well-being, health, education, and the quality of a country’s institutions and found that small countries are more open to trade than large countries, but are not systematically different otherwise.

As I argued in my previous post on distance, New Zealand were prosperous from the time of European settlement despite a small population and their great distance from the main markets of the world on each side of the Atlantic.

Of the ten richest countries in terms of GDP per capita, only four have populations above one million people (Alesina 2003). These countries are the USA (290 million people), Switzerland (7 million people), Norway (4 million people) and Singapore (3 million people). Of these four nations, two are below the global national population median of six million (Alesina 2003).

@RusselNorman tried to outthink, outsmart @JohnKey unlike @nzlabour who just tried to smear him

New Zealand low pay incidence one of lowest in OECD @greencatherine @MaxRashbrooke @nzlabour @dpfdpf

Source: Low Pay Britain 2015 – Resolution Foundation.

Where have all the campaign donations gone?

@Maori_Party The greatest advantage of being colonised by the British

HT: David Friedman.

@jeremycorbyn left-wing wedge issues are all deeply unpopular

German, French and Italian real housing prices since 1975

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Source and notes: International House Price Database – Dallas Fed June 2015; nominal housing prices for each country is deflated by the personal consumption deflator for that country.

@GreenpeaceNZ @jamespeshaw The Futility and Farce of Global Climate Negotiations @RichardTol

It is time for the environmental movement to face up to the fact that there never will be an international treaty to restrain carbon emissions. The practical way  to respond to global warming is healthier is wealthier, richer is safer. Faster economic growth creates more resources for resilience and adaptation to a changing environment.

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Source: Energy Policy & the Environment Report | Leading Nowhere: The Futility and Farce of Global Climate Negotiations.

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