Monthly Archives: June 2019

Art Laffer receives Presidential Medal of Freedom

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Both of the following links were found at Powerline: Trump Gives World’s Worst Economist the Presidential Medal of Freedom and Trump is giving Arthur Laffer the Presidential Medal of Freedom. Economists aren’t smiling.

These sour economic vandals. It’s not even that they are incapable of understanding what he says, but they are even unwilling to listen. The belief that economies are driven from the demand side is so inane that I find it hard to see how anyone with any sense can take it seriously. Everything about how an economy is driven forward and jobs created is dependent on individuals making decisions to do things, then working out what needs to be done and then doing it. No economy in history has ever slowed because there was an unwillingness to buy things. The idea is so stupid it is hard to imagine how it could ever happen in the world as we know it.

The core issue is Say’s Law. If you don’t understand Say’s Law, let me impress on you that you are incapable of understanding how an economy works. If you are interested, however, you can find out from my Free Market Economics, Third Edition, An Introduction for the General Reader. This is what Art Laffer himself wrote about the book, which you can find on the back cover of the text:

‘This book presents the very embodiment of supply-side economics. At its very core is the entrepreneur trying to work out what to do in a world of deep uncertainty in which the future cannot be known. Crucially, the book is entirely un-Keynesian, restoring Say’s Law to the centre of economic theory, with its focus on value-adding production as the source of demand. If you would like to understand how an economy actually works, this is one of the few places I know of where you can find out.’

The American economy is the only economy that has fully recovered from the effects of the stimulus which followed the GFC. It is also the only economy in the world that is managed largely by the supply-side principles, which is why PDT is giving Art Laffer this award.

Socialism may not be the answer but do socialists know that?

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The reality is that you have to be kidding yourself if you think your standard issue modern leftist knows that. The video is taken from here. Watch it for yourself. If you understand why socialism is not the answer, then it is hard to fathom that people in bulk numbers can really be this insane, but they are.

So let me continue with this. I have been sent an article from a friend in New Zealand – Why Call it “Socialism”? – which opens in the following way.

I’ve been coming around to the belief that most modern arguments over “socialism” are a waste of time, because the content of the term has become so nebulous. When you drill down a bit, a lot of “socialists” are really just saying that they would like to have government play a more active role in providing various benefits to workers and the poor, along with additional environmental protection.

Socialism is thus, as he sees it, nothing more than an unfocused desire for better social welfare and a more egalitarian society. Well, maybe, but pay attention to the video. It is beyond ignorance and beyond stupidity. We are truly looking at a cult of some kind, but it is a cult that encompasses near half of the population. This was my reply to my friend.

Thank you for that. Very interesting, and yet, and yet…. Socialism is a personal belief system that has no specific definition. Everyone makes up their own version so whenever some actually existing socialist economy is set up and then inevitably fails, everyone else can say that what they did was not what they had meant by socialism, that what was done was not what they had had in mind.

No one any longer describes what they believe in as “socialism” but I know it when I see it. It is ever and always a means to supplant the market through some kind of government direction in which individuals are not made responsible for their own personal welfare. Instead, governments manage and direct major economic entities; there are huge burdens placed on enterprises, through the taxes that are levied, the wages and benefits they are made to provide, and the regulations that they are made to follow; and there are huge amounts of public expenditures, almost inevitably more costly than the economic benefits they provide, that shape the direction in which an economy is made to follow. There are then large efforts to equalise incomes between those who provide more value than they are paid and those who either do not work or who are allowed to receive incomes well above the value added they have personally created. There are other features too, but you get the picture. The incentive structure is completely warped so that economic returns are very badly correlated with economic contribution.

And with every turn of the electoral cycle, we move further in a socialist direction. Scott Morrison is hardly a free-market capitalist, but he is well ahead of anyone on the Labor side. Your own PM is a complete economic dunce who will do you in if she is given half a chance. Everyone wants to be Mr, Miss, Ms and Mrs Niceperson. I only wish they had some prior understanding of how economies work before they bought in on it.

There you are. Interesting article, but economists turn out to have no political or philosophical sense whatsoever.

I would be placated to some extent if everyone before they waded in on the need for more regulation and re-distribution first explicitly stated that of course, free market capitalism is the only way to manage an economy so these suggestions are only intended to slightly alter the way we go about things. But no one ever says that. Replacing capitalism with something else is the underlying aim, or so it seems to me. There are so many gadgets around, from computers to widescreen television, that everyone will be easily lulled into disaster as in Venezuela with no way out at the end. And none of it will be mentioned by our media who are more into an apathetic torpor than anyone in Orwell’s time could ever possibly have imagined.

Socialism is not the answer

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But you have to be kidding yourself if you think your standard issue modern leftist knows that. I have been sent an article from a friend in New Zealand – Why Call it “Socialism”? – which opens in the following way.

I’ve been coming around to the belief that most modern arguments over “socialism” are a waste of time, because the content of the term has become so nebulous. When you drill down a bit, a lot of “socialists” are really just saying that they would like to have government play a more active role in providing various benefits to workers and the poor, along with additional environmental protection.

Socialism is thus a desire for better social welfare and a more egalitarian society. Well, maybe. This was my reply.

Thank you for that. Very interesting, and yet, and yet…. Socialism is a personal belief system that has no specific definition. Everyone makes up their own version so whenever some actually existing socialist economy is set up and then inevitably fails, everyone else can say that what they did was not what they had meant by socialism, that what was done was not what they had had in mind.

No one any longer describes what they believe in as “socialism” but I know it when I see it. It is ever and always a means to supplant the market through some kind of government direction in which individuals are not made responsible for their own personal welfare. Instead, governments manage and direct major economic entities; there are huge burdens placed on enterprises, through the taxes that are levied, the wages and benefits they are made to provide, and the regulations that they are made to follow; and there are huge amounts of public expenditures, almost inevitably more costly than the economic benefits they provide, that shape the direction in which an economy is made to follow. There are then large efforts to equalise incomes between those who provide more value than they are paid and those who either do not work or who are allowed to receive incomes well above the value added they have personally created. There are other features too, but you get the picture. The incentive structure is completely warped so that economic returns are very badly correlated with economic contribution.

And with every turn of the electoral cycle, we move further in a socialist direction. Scott Morrison is hardly a free-market capitalist, but he is well ahead of anyone on the Labor side. Your own PM is a complete economic dunce who will do you in if she is given half a chance. Everyone wants to be Mr, Miss, Ms and Mrs Niceperson. I only wish they had some prior understanding of how economies work before they bought in on it.

There you are. Interesting article, but economists turn out to have no political or philosophical sense whatsoever.

I would be placated to some extent if everyone before they waded in on the need for more regulation and re-distribution first explicitly stated that of course, free market capitalism is the only way to manage an economy so these suggestions are only intended to slightly alter the way we go about things. But no one ever says that. Replacing capitalism with something else is the underlying aim, or so it seems to me. There are so many gadgets around, from computers to widescreen television, that everyone will be easily lulled into disaster as in Venezuela with no way out at the end. And none of it will be mentioned by our media who are more into an apathetic torpor than anyone in Orwell’s time could ever possibly have imagined.

Me old china plate

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Two stories, separate but thematically linked. The first about Chinese foreign policy starts with this.

Donald Trump’s former chief strategist Steve Bannon has warned that Australia will become “a tributary state” to China unless the Morrison government joins the US in forcefully challenging Chinese hegemony in the region.

And then this: from the Herald Sun.

Premier Daniel Andrews has made a big deal out of talking up the Australian content in Victoria’s huge $45 billion investment in infrastructure projects.

Local content should be a priority and, indeed, the government needs to keep construction unions inside the tent to contain costs and keep industrial peace.

Mr Andrews had pledged a minimum 92 per cent of Australian steel would be used in the $6.7 billion West Gate Tunnel project.

But as revealed Thursday by our state political editor Matt Johnston, contractors for the project have ordered a 33,000-tonne shipment of steel from the Chinese government-owned firm ZPMC.

There are serious questions about what agreements were touted by Mr Andrews to foreign investors during his trip to China last month. Mr Andrews, the only Premier to have signed on to China’s controversial Belt and Road Initiative, has previously said he would work to attract Chinese investment in Victoria’s infrastructure program.

No doubt imported Chinese steel would be a lot cheaper than Australian steel. But the decision may yet cost Mr Andrews much more in union fury and public faith.

The title, btw, is a bit of rhyming slang I learned when I first reached these shores those many years ago. Seems quite appropriate in the present context. And while I’m on it, if one is interested in free trade, this might be of interest: How does China cheat on trade? Let us count the ways.

China cheats by protecting its home market from American imports with high tariffs, tricky non-tariff barriers, and costly, constantly changing regulations.

China cheats by subsidizing the exports of government-owned “national champions” to crush its free market competitors and dominate global markets.

China cheats by preying on weak counties, locking up their natural resources with “debt traps” in an obvious effort to gain a global stranglehold on key resources like bauxite, copper, nickel, and rare earths. These monopolies are not only being used to fuel China’s industrial machine, but to punish those countries who would oppose its predatory policies.

China cheats by subsidizing manufacturing with cheap loans and cheap energy, and also by turning a blind eye to environment, health and safety standards. Because of its cheating, it already dominates industries ranging from ship production and refrigerators, to color TV sets, air conditioners, and computers.

Above all, China cheats by stealing key technologies and intellectual property from the United States and other countries. These activities range from cyberespionage and forced technology transfer down to massive open-source collection and plain-old physical theft.

Economics is and has always been a subset of politics. No economics text can ever tell you what ought to be done, only what the consequences of different decisions might turn out to be. And a modern text doesn’t even do that.