Tuesday, February 20, 2018

The Projected Federal Deficit Over the Next 10 Years

Via Veronique de Rugy and Justin Leventhal.

Note: These are conservative deficit numbers. I believe that interest rate costs alone are underestimated by hundreds of billions.


Thomas Sowell Agrees With Ron Paul About the Federal Reserve

Sowell is pretty good here and shocks the establishment interviewer Paul Robinson.


Seattle Residents Will Outsmart the Socialist 'Behavior Control' Soda Tax

LOL. The Seattle socialists think they are going to collect oodles of cash with their creepy soda tax.

Charles Hughes explains why they won't:
Seattle recently became the latest major city to enact a sweetened beverage tax. In response to the new levy, some retailers have calculated how much of the price is due to the tax, and customers are reeling from sticker shock. One local reporter found thatthe tax added $10.34 to a case of Gatorade, bringing the final price to more than $26.00....  
One of the justifications for beverage taxes is that customers will respond to price changes by reducing consumption of taxed beverages. The mechanism here is straightforward: tax something to get less of it. If people were to substitute diet sodas or other, less-harmful beverages for sugared sodas, they would be healthier

The City of Seattle denies that consumers respond to higher prices. On the city government’s website explaining the tax, the Finance & Administrative Services Department takes pains to mention explicitly that the “tax is not collected by the retailer nor is the tax burden intended to fall onto the consumer. The intent of the sweetened beverage tax is to tax the distributions of sweetened beverages into Seattle for retail sale in Seattle.”  
If the burden of the tax is supposed to completely bypass the consumer, as unlikely as that might be, what would drive them to substitute away from the unhealthy products that the government is taxing in the first place?Whatever the City states, not all of the tax will be borne by distributors, some of the burden will fall on stores and consumers, and they will respond to the change in price in some way. The less-visible Frequently Asked Questions document for the tax acknowledges this, as “the ordinance does not prohibit a business from passing on the expense of this tax.... 
>Many people are likely to avoid the tax by traveling to other untaxed locations to purchase groceries. Costco tells its customers about locations outside the city that are not subject to the beverage tax. One customer told KIRO, a local news station, that she would go to the location in a nearby town. People will undoubtedly follow her lead, so the tax will have limited success in its health-related goals while also harming local businesses and failing to generate tax] revenue.

Monday, February 19, 2018

WAR: Per Bylund vs. Nassim Nicholas Taleb

Per Bylund, Assistant Professor of Entrepreneurship & Records-Johnston Professor of Free Enterprise in the School of Entrepreneurship at Oklahoma State University, and an Associated Scholar with the Mises Institute, tweets out:

For the record, I do not believe it is necessary for a professor to have been an entrepreneur to teach the theory of entrepreneurship, any more than it is necessary for a surgeon to jump and touch a basketball rim to perform knee surgery.

That said, I suspect that many academic economists are confused about entrepreneurship because they have never seen it up close, the way a fat knee surgeon who was stuck on an isolated island with other fat people might find it difficult to believe that some humans can jump and touch a basketball rim 10-feet high.

It would not be impossible for a fat knee surgeon on such an island to consider how a person could jump to touch the rim but it would take a superior mind to conceive of such.

As far as teaching entrepreneurship rather than entrepreneurial theory, what can be done in a classroom is extremely limited.


More Evidence of the High Collateral Damage of a War on Cash

By Lawrence H. White

The leading arguments for banning large-denomination currency notes are those made in a much-cited working paper by Peter Sands and at book length by Kenneth Rogoff. They have been rebutted persuasively by Pierre Lemieux and Jeffrey Hummel in their respective reviews of Rogoff’s book. I have previously offered my own rebuttals here and here.
The justification for returning to the topic now is that two recent reports, issued by the Federal Reserve Bank of San Francisco and by the European Central Bank, provide new evidence on the public’s use of large-denomination notes. This evidence is essential to any serious evaluation of proposals to ban large-denomination in notes in the United States and Europe.
The Sands and Rogoff argument assumes that the users of large bills are almost entirely criminals; use by innocent citizens is rare. Rogoff writes in his book:

New Fed Chairman Powell Taps Two Money Printers as Advisers

Jay Powell
Federal Reserve Chairman Jerome Powell has tapped two Keynesian specialists to serve as senior advisers, reports The Wall Street Journal.

In other words,  we get the first indication that Powell, a lawyer, will rely on theories that have led the Fed to a string of failure including 18 recession since the start of the Fed and a price level increase over the same period in excess of 2,500%.

Jon Faust, a professor of economics at Johns Hopkins University, will return to the Fed to advise  Powell on a part-time basis. He served as a senior adviser to Powell’s predecessors, Ben Bernanke (who ushered in the 2008 financial crisis) and Janet Yellen.

Faust will spend one day a week at the Fed until completing his teaching duties for the current academic term. His role after that hasn’t been determined, according to WSJ.

Antulio Bomfim, an economist in the Fed’s monetary affairs division, also will serve Powell as a special adviser. Bomfim served as an economist at the Fed from 1992 to 2003 and returned to the central bank as a senior adviser in 2016.

These guys have no clue what is ahead for them. The years ahead will not be the same as the smooth ride years of Yellen. And they have no clue how to deal with crisis. Incredibly ,they are even musing now about the desirability of greater than 2% price inflation. We are headed far beyond 2% price inflation without any help from these characters.


Greg Mankiw Slams Trump's Asinine Mercantilist Position on Trade

Greg Mankiw
Greg Mankiw, the Robert M. Beren professor of economics at Harvard University and multi-millionaire economic textbook salesman, writes in The New York Times:
When President Trump imposed tariffs on imported solar panels and washing machines, I was reminded of a line from George Orwell: “We have now sunk to a depth at which the restatement of the obvious is the first duty of intelligent men.”

While Orwell’s comment was focused on military and political issues of the late 1930s, my subject is economics, and to most people in my field, the benefits of an unfettered system of world trade are obvious. Any good student of Econ 101 can explain the logic.

But in light of the growing evidence of the Trump administration’s apparent disdain for free trade, from the recent tariffs, to a report recommending fresh quotas or tariffs on steel and aluminum, to its earlier rejection of the Trans-Pacific Partnership, it may be worth reviewing the theory, as well as the evidence that convinces economists that the theory is right.

The place to start is 18th-century Scotland. Adam Smith’s book “An Inquiry Into the Nature and Causes of the Wealth of Nations” is often credited as the beginning of economics. The case for free trade is one of its major themes.

Smith argued that trade among nations is like trade among people. No one feels compelled to sew his own clothes and grow his own food simply to keep busy. Instead, we find employment doing what we do best and rely on other people for most goods and services. Similarly, nations should specialize in producing what they do best and freely trade with other nations to satisfy their consumption needs.

.This argument was expanded by David Ricardo in the 19th century. Ricardo addressed the question: What if one nation does everything better than another? His answer was that trade depends on comparative advantage — how good a nation is at producing one thing relative to how good it is at producing another.

Ricardo used England and Portugal as an example. Even if Portugal was better than England at producing both wine and cloth, if Portugal had a larger advantage in wine production, Portugal should export wine and import cloth. Both nations would end up better off.

The same principle applies to people. Given his athletic prowess, Roger Federer may be able to mow his lawn faster than anyone else. But that does not mean he should mow his own lawn. The advantage he has playing tennis is far greater than he has mowing lawns. So, according to Ricardo (and common sense), Mr. Federer should hire a lawn service and spend more time on the court.

By the way, Ricardo was not merely a theorist. He was also a successful stock trader and a member of Parliament. During his political career, he fought for free trade, notably, by opposing the Corn Laws, which imposed tariffs on grain imports.

Sunday, February 18, 2018

Adam Smith on How to Create a Country of Great Oppulence

Adam Smith

"Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things," from some notes of lectures Adam Smith gave in 1755, some 21 years before the appearance of the Wealth of Nations (1776)

Smith continued, "All governments which thwart this natural course, which force things into another channel, or which endeavour to arrest the progress of society at a particular point, are unnatural, and to support themselves are obliged to be oppressive and tyrannical."


(via Liberty Fund, ht David Warsh)

Michael Malice on North Korea's Economy


Get Ready for the War on Meat

By José Niño

Plant-based diets, especially vegan diets, seem to be all the rage these days.
Based on the practice of eschewing animal products, veganism has attracted a broad coalition of interest groups — ranging from animal rights to environmental activists — who believe that veganism is the most ethical and sustainable way of promoting human health and animal welfare.
At first, these appear to be reasonable premises for an alternative lifestyle that challenges the dietary status quo.
But when placed under the microscope, the modern vegan movement has shown signs of increased politicization and a tendency to mesh with socialist causes. 

Veganism as a Vessel for Interventionism

Recent developments have demonstrated that veganism is making headway not only in the cultural realm, but also