Wednesday, 30 January 2019

A Rich Challenge For You

Envy of the rich is one of the most dastardly things lefties do. Chief Executives get lambasted for earning too much; millionaire innovators are the scourge of society, and the top few dozen richest people on the planet are thorns in the flesh of the dim-witted social justice warriors holding placards in central London bemoaning the 'injustice' of the wealth gap, and the 'greed' of the rich.

To see why the leftist antipathy is misjudged, you only need to consider the question of what you personally would need to do to be rich. Think for a few moments. If you don't have the skills and experience required to earn a big salary, you are going to need to come up with something that society wants on a large scale. Have a think ....

Did you manage to think of a way of making yourself rich yet? I suspected not. It is not very easy to produce a good or service that masses of people value more than it would cost you to produce, especially as your venture would involve large start up costs and initial risk and foresight.

The reality is, very few people possess the creative nous to become millionaires, let alone billionaires. That is why, when lefties whinge about rich people, I suspect the subtext is that they are really bemoaning their own lack of entrepreneurial talent - it's an underhanded lament at what others can do better than them.

I'm not rich, but I greatly value the contributions of the likes of Jeff Bezos, Bill Gates, Mark Zuckerberg and countless others. Lefties value them too; they just forget that they do. Because, you see, that is what is great about the market. Jeff Bezos has got rich from being an Amazon shareholder, but the combined riches of the Amazon customers have become even richer once you aggregate the lower prices and consumer surpluses they've enjoyed.

The more competition there is in the market, the more benefits go to the consumer. Rich people like Jeff Bezos and Bill Gates don't just make themselves wealthier; they increase the wealth of the average person in society too. Think how fortunate you are (as am I) to live in a society in which you are made so well off despite not having the entrepreneurial prowess to make large sums of money. I'm typing this on a laptop, sharing it on the Internet, surrounded by luxuries that my grandparents would have found astonishing - and for a lot of these luxuries, it is rich, creative, innovative risk-takers I have to thank. On top of that, we should all be thanking each other too - after all, no single person does anything, even make a pencil, without the help of everyone else.

Finally, some lefties think that typical workers are being exploited by the rich executives that run their companies. A basic understanding of economics would tell them that this is untrue: for as long as there is enough freedom in a marketplace to allow competition to operate, every worker is paid their marginal product - which is to say, they are paid what their labour is worth to the firm.

The upshot to all this is that the Corbynites have got their whole political mandate wrong. No country, or group of citizens, has ever risen to its material feet by bringing richer people down. Poorer people, whether that's someone on the dole in Newcastle, or someone at the subsistence level in Nigeria, only rise to increased prosperity by creating something they can trade - an invention, a service or their labour.

No injection of material prosperity or economic growth is created through redistributing wealth from top to bottom. Yes, of course, redistributive measures are fine as a safety net to help society's most vulnerable, and for public goods like defence and the rule of law - but those who see the transfer of capital through confiscation as an envy-driven vehicle for levelling society are both uninformed and misguided.

Thursday, 17 January 2019

Good Cop, Bad Cop Economics: Good Cop

In the last Blog post, entitled Good Cop, Bad Cop Economics: Bad Cop, I had a few choice words to say about the left's culpability in the social/political/economic problems that preoccupy so much of their attention. I ended by promising a follow-up in which I offer a solution to how all this can be put right with a pretty radical but effective overhaul of our current framework.

The way to reform the system is simple in explanation but more complex in execution (and very timely perhaps, given the current Brexit debacle over an exit strategy). It is this: enshrine in law any policy that proves to be demonstrably beneficial in net terms to the economic well-being of the country. Now obviously this must come with caution, because it is not always easy to empirically verify whether the economic well-being of the country improved as a direct result of a policy, or whether there were other important factors not related to a particular policy.

But thankfully most economic logic carries enough weight to show why a policy is either a good one or a bad one - and if such positive policies became legally binding they would be safe from party political interference and protected from the dangers of being reversed for political gain. Provided the people making the laws understand the indubitable economic benefits that the nation will enjoy from these acts of legislation, and are able to convey them in a way that laypeople can understand, there are plenty that could be instituted right away.

For example, it could be made law that the UK may not impose any import tariffs on foreigners - a policy that unquestionably harms both the nations involved in the trade exchange. Even if foreigners don't reciprocate and still wish to impose tariffs on us, we would still be better off not imposing tariffs on them.

Another example, it could be made law that no politician is allowed to interfere with the price system generated in a supply and demand market. From now on, the price of everything must be governed by market signals, not woefully inadequate politicians. No longer can politicians make it illegal to sell your labour below a set price, or tell you how much or how little you have to charge for a good or service. Leaving prices to the market signals of supply and demand will make the nation better off by eradicating the numerous deadweight costs associated with price fixing.

A third example, it could be made law that no domestic government can interfere in the competition process by subsidising new businesses or bailing out failing businesses. A fourth example, it could be made law that all income tax is flat, not progressive, and that top rates do not exceed a certain high-end threshold (probably somewhere in the region of 30%, but lower ideally). It can also be enshrined in law that governments won't tax corporations (which only ends up falling on employers and consumers anyway). Both of those would ensure politicians get the incentives the right way round - that they are incentivised to manage their public spending properly, not treat taxation as a money tree.

The public needs laws like these to protect them from their own economic misunderstandings. Once it started to be more widely known that these laws would make the nation better off - in terms of GDP, levels of outside investment, job creation, lower levels of unemployment, or any other assessment you care to make - the nation will be a lot easier to govern if the electorate better understands the link between market freedom and economic well-being. More or less every nation in the world that does well in terms of sustainably higher GDP also does well in terms of prosperity, freedom and well-being too.

With the introduction of such laws there will be less of a need for party political rivalry in playing fast and loose with the public's knowledge deficiencies and the extent to which they can be seduced by short-sighted policies. Laws like the above would also counteract the short-termism of political parties' interests whereby they rarely get to feel the long term effects of bad policies or get held accountable for their mistakes.

There is one obvious caveat to the above. Well, two if you allow for the fact that occasionally even sensible legislation may need to be temporarily reassessed on a case by case basis if it's in the public interests to do so (but we'll allow for the fact that this is hardly an insurmountable issue). No, the main caveat I have in mind is that such a radical change to the political framework would have to evolve over a (hopefully) short period of time - it would be too drastic to introduce as a fait accompli shake-up of the system right away. The reason being; there would need to be a transition period during which the public spending bill could come down while at the same time the private sector revenue goes up. Like children learning to walk, it would be foolish to demand that they run.

The upshot is, if done proficiently, these are the radical measures that are needed to properly transform our political landscape from the grass-seed of failure and incompetence to the fresh wheat of success and prosperity. Cutting the grass may keep it neat and tidy - but it'll never give you a field of wheat. If we want to get political wheat, we need to put away the shears and go down into the soil, where the economic foolishness of the present day political landscape can be ploughed up and re-sown.

Saturday, 5 January 2019

The 'Destroying Our Planet' Fallacy

One of the biggest fallacies out there is the complaint that we are 'destroying our planet'. We keep hearing rallying calls to care for the earth - but, alas, the people who think we are destroying it are confusing their terms.

The earth is not a sentient being that can be destroyed, and nor does utilising its resources constitute destruction of the planet. The resources we use are vital ingredients for making the world a better place, reducing suffering and misery, and increasing knowledge, well-being and the quality of life we have.

Take a forest as a good example. Cutting down trees for the paper and replanting more is not destroying the earth - it is utilising a vital resource that enriches humanity greatly. Yobs setting fire to a forest, on the other hand, is a case of being careless with the planet's resources because they are being supplanted for value-less ruination.

The large swathes of people who are constantly telling us that we are destroying our planet are seeing our use of resources as being like burning down a forest when they should be seeing it as being like making paper from trees. The earth is a giant rock that's over 4 billion years old: it was here long before we were, and it can survive long after we have gone. The notion of destroying it is a fallacious one. The only thing we can destroy is our capacity for utilising its resources, but given that it is the utilisation of its resources that they mistake for its destruction, the accusation is laughable.

For obvious reasons, saving the planet (by which it is meant ‘the earth’) must always be a secondary aim behind saving the planet (by which it is meant ‘life on the planet’). If preserving life and increasing well-being are the primary goals, then part of that goal (the most urgent goal, in fact) is to bring an end to global poverty and help the neediest people out of their plight of impoverishment.

This leaves those who think we are 'destroying the planet' with a big problem, because the only way to bring an end to global poverty and help the neediest people out of their plight is to help those people attain economic freedom, and the ability to trade, be self-sufficient, and productive in the broader market economy. And, of course, the only realistic way to achieve this is to generate the kind of industry and globalised expansion of the market that will come at the cost of using some of the earth's natural resources.

The upshot is, in the short-term future, to eradicate global poverty entirely, we're going to have to carrying on making the best use of the earth's raw materials. Like most things, there's a trade off, and all it takes for an intellectual malady to occur is the slightest reactionary ignorance to assert that 'We are destroying the planet' as though there's no need for consideration of the benefits vs. the costs of doing so.

It is thanks to the use of the earth's resources, particularly since the Industrial Revolution, that we've moved the human condition from a state of widespread poverty to a state of greatly reduced poverty and much more prosperity. Of course there's still a way to go, but as the developing world countries increase their infrastructure and market potential, they are going to be using the most ecologically efficient technology - so there is every reason to continue to develop and pioneer more environmentally efficient methods of industry.
Realistically, the things that are the biggest ingredients in achieving this - free trade, healthy imports/exports, high employment, sensible and equitable government spending, a good legal system, cultural plurality, immigration, global travel, welfare systems, human rights, property rights, family rights, and being freer citizens* – are going to have an environmental cost that is more than compensated for by the good it will do for the neediest people in the world.

Sadly, it's usually the lack of these things that is behind the killing of endangered species and the causing of extinctions, as well as people in developing countries not having a proper stake in their own country's resources - all of which are certainly things to be spoken out against.