Category Archives: Economics

Pain au choco-brat

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Somebody needs to report to Tim Worstall for training:


Anyone want to take a punt on what the rent is for a croissant stall at LaGuardia? It was actually the section on coffee prices which interested me most in Tim Harford’s The Undercover Economist, in which he pointed out that even in busy London stations coffee sellers don’t make much money because the landowner simply increases the rent. In other words, it’s the landowners via rents who make money in prime locations, not the operators of businesses. I’ve recently begun to realise that is a problem: any economic system where ownership of land generates enormous returns while people working 8-12 hour shifts actually doing something have their rewards capped at a few percent probably isn’t going to last very long. Eventually people who don’t own land will get fed up with those that do and start voting in socialists – such as Jeremy Corbyn, whose base is made up of Millennials who will never be able to afford a house because previous generations, in cahoots with the government, inflated prices and pulled the ladder up after them.

If AOC had acknowledged the problem of enormous rents accruing to landowners at the expense of productive workers, she might have been onto something (although I doubt she could find a solution to a squeaky door let alone a complex problem at the intersection of economics, politics, and liberty). Instead she dived head-first into labour theory of value nonsense, presumably believing if stall vendors at LaGuardia made $15 per hour croissants would be more affordable. But that probably won’t make any difference: people vote for socialists like AOC because they feel the current system is stacked against them. The trouble is they’re probably right, but they don’t know how or why. The challenge for non-socialists is to do what Thatcher did, and give ordinary people a reason to embrace capitalism which works for them. In practice, this means an economy in which an ordinary young couple can afford to buy a house and raise a family without being the offspring of a millionnaire or going to Harvard. Unfortunately, we appear to be heading in the opposite direction which is why, despite the economic idiocy behind AOC’s tweet, we’ll be seeing a lot more of her ilk in future.

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Universal Basic Idiocy

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I’m about half an hour into Joe Rogan’s podcast with Andrew Yang, an American presidential hopeful who’s main platform is a universal basic income (UBI). I find discussions of a UBI to be useful and sometimes fun in philosophical terms, but as a policy idea it suffers from fatal flaws which ought to be obvious but for some apparently aren’t. The ZMan points out one, which concerns price inflation:

Imagine the government decides to help BMW sell more cars, so they offer every citizen $5000 if they spend it on a BMW, rather than some other car. BMW is now facing a wave of people coming into American dealerships toting a $5,000 check payable to BMW. The logical thing for BMW to do is raise the price of their low end models by $5000. That way, they don’t increase production costs, but they increase the profit per car. In effect, the floor for entry level buyers was just raised by $5000 by the government.

There’s a pretty good real world example of this. The government decided to do something to help working class people get into college. Since many need remedial help, before taking on college work, the scheme was to offer a subsidy to be used for community colleges. The students would use the money to prep for college then head off to a four year university, presumably using loans and aid at that level. The result, however, was the community colleges just raised their tuition by about 65% of the subsidy.

But I don’t think even economic arguments do the most damage to the idea of a universal basic income. UBI comes from the libertarian fringe of politics and they have a habit of falling into the same trap they frequently accuse communists of: they ignore human nature. The reason welfare programs came into existence a few generations ago is people decided it was immoral for someone to be left to starve or die through illness or bad luck. The reason there are giant, all-encompassing welfare states today is people now think it immoral for anyone to suffer the consequences of their bone-headed actions. Proponents of a UBI think we’re still in some bygone era, rather than an age where couples with no job pump out seven children each and suffer no social opprobrium, even as they moan their taxpayer-funded house is too small.

The idea behind a UBI is it would partially replace other forms of welfare, but the reality is this money would disappear from the hands of the feckless quicker than #MeToo campaigners at the mention of Monica Lewinsky. They’d then be worse off than before and the same people who declared their situation intolerable and campaigned for the original welfare programs would pick right up where they left off. The idea that the society which constructed today’s welfare state would ignore the plight of some idiot who blew his UBI on crack and step over him while he starved in the gutter is ludicrous; the original payments would be restored, and the UBI a handy bonus for professional grifters who fancy a new set of alloys for their E36 M3s.

The fact this doesn’t get acknowledged by proponents of the UBI makes me wonder if they know much about the societies they claim to inhabit. The best that can be said is this makes them indistinguishable from most other politicians.

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The Underclever Economist

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Am I being dumb here?

Let’s say they’re bicycles. Effect on domestic consumers is 0.6m of them paying $30 extra for an imported bicycle = $18m loss

Domestic producers get to sell an additional 0.2m bicycles @ $300 each = $60m gain

Government takes in $30 on 0.6m imported bicycles = $18m gain

Overall effect = $60m + $18m – $18m = $60m gain

The exercise is supposed to show tariffs damage the overall economy, so what am I missing?

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Loyal Welsh Show

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The Welsh seem to be doing pretty well at sport recently. Having thumped England at rugby at the weekend, we also have a Welsh holder of the Tour de France crown. When Aaron Ramsey moves to Juventus next season he will become only the second Brit after Gareth Bale to be playing top-flight football abroad: both are Welshmen.

Unfortunately, such success seems to have done little for Welsh confidence. Last week a celebrity chef did a TV show and got some things wrong about Welsh geography. Welsh Twitter went mental, which is what prompted the Times article I responded to on Friday. This is how one person on Twitter reacted:


This are not the words of someone who is comfortable being Welsh. If a huge part of your identity is dependent on what other people think of you, you’re not very confident as a people. I’ve often thought that if the English suddenly disappeared in a puff of smoke, the Irish would have to invent new ones: as Brexit has shown, they simply can’t imagine themselves without referring to the great oppressor next door. By contrast, can you imagine a Frenchman caring that a Brit got their geography completely wrong? Or a Dutchman being cross that nobody seems to know the difference between Holland and The Netherlands? If anything they’d laugh.

Alas, it seems the Welsh have looked at the Irish and Scots and decided there is political mileage in seeking offence and victim-status. Over the course of my Twitter conversations I heard numerous references to English “colonisers”, and Wales being little more than a colony of England, a view which casually overlooks that the Welsh and English have been politically, economically, and socially integrated pretty much since William the Conqueror. It appears the nationalist movement is a lot stronger than when I was growing up, and people like me who are happy for Wales to be part of the UK are denounced as “Brit Nats” (this term was new to me).

I asked a few people what the economic basis of an independent Wales would be. One said that water would be the strategic resource underpinning the exchequer, if only Wales were allowed to charge full price for it. Now I know the giant Welsh reservoirs supply plenty of English homes, but I’m not sure a London government would just cave in to a Dai Putin threatening to turn off the supply; more likely, they’d ship a few economics textbooks to Cardiff and build more reservoirs. Whatever the cost and inconvenience, England will not die of thirst without Wales. Then I got this response:


While it is true that Wales produces a lot of electricity which is sent to England, Siberia produces lots of gas which is sent to Moscow. You produce where it is convenient and you send it to where it is needed. Wales hoarding electricity makes no more sense than Siberians hoarding gas. There’s also the problem that most of the electricity generated in Wales comes from coal and gas-fired stations. Both are imported fuels, so basically Wales serves as the place to house the turbines. This is an interesting definition of a country being “energy rich”. Alas, I expect my correspondents above have no idea how electricity is generated; they’ve just seen that Welsh power stations export to England and think it represents a geopolitical advantage which could underpin an independent nation. That England could build its own power stations (green idiocy notwithstanding) and import coal Australian coal and Qatari gas directly doesn’t seem to have occurred to them.

Having been through the mill of Welsh nationalist Twitter over the past few days, I am happy about the rugby result but I think a chef making a goof on a TV show is the least of their problems.

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Hacks Off

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It appears nobody wants to pay to run adverts alongside pieces denouncing all men as violent, racist, scumbags, much less pay to read them:


That someone in modern journalism should cite 10 years wittering on about gender politics and a PhD in romantic comedies as achievements explains a lot about why these redundancies are being made. Here’s another (via Rita Panahi):

Note that all these gender politics reporters insist on living in Brooklyn and working in Manhattan, or other expensive liberal cities. Perhaps if they’d moved their operations to Colonsville, KY they’d feel less financially shafted? And I’m sure this helped:


While it’s poor form to mock those who’ve just been made redundant, I am not too concerned about these people. The only way to get a job in New York writing about gender politics is to have wealthy parents who can fund the lifestyle your salary won’t support. Indeed, full-time jobs in media companies filter out those who don’t have wealthy parents by first stipulating a period of unpaid internship. And who do you think paid for that PhD in romantic comedies? I doubt this lot have been financially independent in their lives, and getting booted from what is effectively a paid hobby won’t change that. Their egos might take a knock though, so spare a thought for them as you kneel to pray this evening.

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Professor Worstall

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Today I sat a test to benchmark my knowledge on business, finance, economics, organisational behaviour, etc. at the start of my course. The idea is I’ll sit the same test at the end and see whether anything has sunk into my thick skull, or it all went in one ear and out the other.

I’m not sure how I did because they don’t give you the results, but some questions I had absolutely no idea about. Of the ones I did, I’d say a good three quarters I was able to answer mainly because I’d spent the past ten years reading Tim Worstall’s blog. Perhaps we should start calling him Prof.

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An Optimistic Request

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Good luck with this, then:

President Tayyip Erdogan told Turks to exchange gold and hard currency into lira on Friday as part of a “national battle” against economic enemies he said have irreparably ruptured ties with Ankara.

The very reason Turks would be hoarding gold and foreign currency was to give them a route out in the event he cratered the economy. Middle class Turks must be fleeing in droves right now, particularly when their president makes statements like these:

On Thursday, he urged supporters not to worry, saying that while overseas investors had dollars, Turks had Allah.

And:

Early last month, he claimed the exclusive power to appoint the bankers that set interest rates – and to cement his control he has put his son-in-law in charge of economic policy.

So Turkey is well on the much-predicted path to becoming a nasty Islamist basket-case. But if they weren’t in NATO, would anyone care?

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Burning Burberry

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This is interesting from an economics point of view:

Burberry, the upmarket British fashion label, destroyed unsold clothes, accessories and perfume worth £28.6m last year to protect its brand.

It takes the total value of goods it has destroyed over the past five years to more than £90m.

Fashion firms including Burberry destroy unwanted items to prevent them being stolen or sold cheaply.

Someone has obviously done some calculations and estimated the damage done to the brand’s image by selling their products at a discount is greater than £90m. So, it’s cheaper to burn it.

Burberry is not the only company having to deal with a surplus of luxury stock.

Richemont, which owns the Cartier and Montblanc brands, has had to buy back €480m (£430m) worth of watches over the last two years.

Analysts say some parts of those watches would be recycled – but much would be thrown away.

Better than being flogged second hand on eBay, obviously. Naturally:

Environmental campaigners are angry about the waste.

Those last three words feel superfluous.

“Despite their high prices, Burberry shows no respect for their own products and the hard work and natural resources that are used to made them,” said Lu Yen Roloff of Greenpeace.

You can imagine the mental gymnastics they went through trying to put their knee-jerk objections into vaguely-coherent words, can’t you?

“The growing amount of overstock points to overproduction, and instead of slowing down their production, they incinerate perfectly good clothes and products.

Are they still producing the same line of clothes they’re burning? Unlikely. And since Lu Yen Roloff brought up thrift:

Maybe we can get Burberry employees and shareholders to comment on her lifestyle?

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Harley-Davidson and Tariffs

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There’s an irony here which has largely gone unmentioned:

U.S. President Donald Trump on Monday slammed Harley-Davidson Inc (HOG.N) after the motorcycle maker said it would move production for European customers overseas to avoid retaliatory tariffs that could cost it up to $100 million per year.

Trump said he has fought hard for the company and was surprised by its plans, which he described as waving the “White Flag.”

Harley-Davidson, the dominant player in the heavyweight U.S. motorcycle market said earlier on Monday it would not pass on any retail or wholesale price increases in the EU and instead focus on shifting some U.S. production.

So, Harley-Davidson doesn’t like tariffs and will re-arrange its operations to avoid feeling the consequences of them. Fair enough, but:

With an economic recession causing sales of all motorcycles to slide, with even Japanese manufacturers like Honda Motors (NYSE:HMC), Kawasaki, and Yamaha overestimating demand, Harley’s delicate financial condition couldn’t afford the discounting the oversupply was causing. Despite the Japanese bike makers offering to help Harley make it through the crunch by giving it technological assistance and providing tens of millions of dollar in loans to keep it going, Harley instead chose protectionism and petitioned the Reagan administration in 1982 to raise tariffs.

As it had been since the 1940s, Harley-Davidson was the U.S. bike industry, being the lone American bike maker left in the market, although Honda and Kawasaki did have a single plant each located in the U.S. But with Harley’s global market share slipping, the U.S. International Trade Commission determined that Honda, Kawasaki, Suzuki, and Yamaha had hurt Harley’s business, and advocated a tariff hike. Reagan ended up raising the tariffs from 4.4% to 49.4%, though the rates were to fall by a set amount each year thereafter, with their removal or extension decided after five years.

The article goes on to suggest the tariffs on Japanese motorbikes didn’t save Harley-Davidson, but it did give them a much needed shot in the arm.

However, Harley-Davidson staged a dramatic recovery, with sales rising so fast that after just four years it petitioned the government to lift the tariffs, saying it no longer needed protection, making this a simple success story of targeted trade protection.

I don’t know if Trump is aware of the history of Harley-Davidson and tariffs; if he is, it might explain why he’s rather annoyed with them.

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Scottish Stupidity

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This amused me:

The Scottish Parliament has become the latest building to introduce free sanitary products for all staff and visitors.

The move follows concern over the accessibility and affordability of tampons and towels.

The decision from the all-party Scottish Parliamentary Corporate Body means free sanitary products will be available in all 42 women’s toilets.

It was hailed as a “win for gender equality” by MSP Kezia Dugdale.

The cost of providing the free sanitary products is expected to be between £2,000 and £3,000 a year.

Ms Dugdale, who is a member of the corporate body, said women often found it difficult to access sanitary products during the working day.

Basically, the taxpayer is subsidising the grocery shopping of those who work in the Scottish Parliament, most of whom will be rather handsomely paid in comparison with said taxpayer. For instance, the annual salary of an MSP such as Kezia Dugdale is over £62k per year (.pdf); the median wage in Scotland is just over £23k.

This isn’t the first time a government policy has been aimed at subsidising the lifestyles of the wealthy middle classes (which coincidentally includes those making the policy) at the expense of the poor. In fact, it pretty much defines most policies these days.

Despite half of the population experiencing menstruation at some point, very few workplaces have taken steps to become period-friendly and that’s why I’m pleased the Scottish Parliament is leading by example.

Many of those women experiencing menstruation will be poor, single mothers who don’t work at or visit the Scottish parliament, and who no doubt struggle to purchase groceries thanks to their taxes being frittered away by grifters in Holyrood.

Her Labour colleague, Monica Lennon, is bringing forward a member’s bill to create a statutory duty for free provision of sanitary products.

Ms Lennon also welcomed the move and called on other parliaments, buildings and employers to take similar action.

It’s not just the economics that are stupid here. I can guarantee that within a very short period (ahem), these free sanitary products will be snaffled in bulk, leaving none available or costing a fortune to replace. You cannot leave boxes of sanitary pads and tampons lying around in a staff toilet any more than you can install a machine on the street which dispenses cans of Coke for free. Perhaps this would work in Japan, maybe in a select few other countries, but the UK isn’t among them. And what’s amusing is you can be damned sure the sort of women who will fill their handbags with these items for use at home, thus wrecking the system, will be the right-on lefties who dreamed it up in the first place. Modern lefties always strike me as the sort who’d steal the sugar sachets from Little Chef while lecturing the rest of us on how selfish we are.

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