FRIDAY MORNING RAMBLE: The boring bloody budget edition

Anyone have links to good Budget commentary? Because I struggled to stay awake throughout Bill’s self-justifying dirge, so failed to post my own. (And I’m betting I’m not the only one who so struggled.) How about you add good links in the comments, if you have any, and I’ll add them up here as I see them. In the meantime, while Americans were sleeping…

One measure of today’s housing crisis: Remember when a new subdivision wasn’t national news?
New subdivision gets green light – RADIO NZ

Here come more cowboys.
State houses checked for WOF – Mike Butler, BREAKING VIEWS

10 Questions for Loopy Len on his backtracking Unitary Plan.
Planning Parrot: 10 Questions for Len Brown – WHALE OIL

He’s right, you know.
Open the Door to Migrants – Luke Malpass, NZ INITIATIVE

And the real danger to opening the golden door is … ? “A US border security expert who won a Fulbright and decided to write his thesis on New Zealand’s border security … concluded the major threat to New Zealand’s borders was not terrorism but a biosecurity breach.”
Burn after reading – DIM POST

Just who would society be better off without? A disabled son, or someone saying he should be killed off “because of their cost to society?
Better Off Without You – AUTISM AND OUGHTISMS

You know, any politician could do the same today. < cough > cannabis < cough >
The Real Reason for FDR's Popularity – Mark Thornton, MISES DAILY

Allegedly.
The 25 hardest things about living in New Zealand – BUZZFEED

The truth about the death in Benghazi of US ambassador Chris Stevens and his colleagues is slowly emerging—with the Obama Administration delaying it at every step.

Andrew Bolt offers “10 signs that the death of the global warming scare are unmistakable. Now it's time to hold the guilty to account.”
10 Signs that warming scare is all hot air
Where are Gore’s hurricanes?
Green energy: keeping warm by burning billions of dollars
Are the satellites lying about poor, drowning Kiribati?
Look at this other drowning island, the Global Mail writer insisted. So I did…
Robyn “100 metres” Williams comes up 99.3 metres short

Windows 8 is only the beginning of Microsoft’s problems, and maybe the start of understanding creative destruction?
Microsoft blues – ECONOMIST

“Unemployable” head of BP Tony Hayward finally lands a temp job.
Ex-BP boss Tony Hayward gets life back with new job at Glencore Xstrata – HERALD SUN

A free chapter from David Stockman’s superb new book, The Great Deformation – The Corruption of Capitalism in America
New Deal Myths of Recovery – LEW ROCKWELL

A new book by every modern economists and central bankers’ hero.
How I Printed So Much Money in Zimbabwe That the Country Experienced Hyper-Inflation – EPJ

See what I mean: “Paul Krugman just endorsed the mad money printing that has been launched in Japan under the rule of the new Prime Minister Shinzo Abe…”
More For the Krugman File – EPJ

Don’t believe Chinese data, especially when it’s good.
China's Data Manipulation In One Chart, And Why The Real Data Implies Weakest GDP Growth In Over 20 Years – ZERO HEDGE

Do believe European data, especially when it’s this bad.
France Double-Dips As European Recession Is Now Longest On Record – ZERO HEDGE

A Capitol Hill briefing on copyright by a group of free-market economists, lawyers, lecturers and entrepreneurs.
CopyRIGHT: Can Free Marketeers Agree on Copyright Reform? - CEI Video

What say you, Bitcoin boosters?
US Government Begins BitCoin Crackdown – ZERO HEDGE

Yes, you too can make your own Periodic Table of Spices (above).
Magnetic Periodic Table of Herbs and Spices – INSTRUCTABLES

Did you know you can attend this July’s “Objectivist Summer Conference” in Chicago wherever in the world you are by webcast? With some great sessions in the offing—from The Politics of Pretend to Convincing the Intellectual Property Skeptic to Frank Lloyd Wright to 1910: “The First Golden Age”—you really should check it out:
Livestreaming – OBJECTIVIST SUMMER CONFERENCE, 2013

Recent historical analysis of the toxin America’s founders left subsequent generations to clean up.
Thomas Jefferson's Nightmare – HISTORY NEWS NETWORK

You know you can download whole books free at the Mises Institute, right? Like this collection of essays by Hayek, for example, including his classics like ‘The Use of Knowledge in Society’ and his contribution to the calculation debate.

She’s right, you know.
Breaking news: Stuffed Rape Culture – HAND MIRROR

An exploded view of a Frank Lloyd Wright classic…
Usonia at SCJ – WRIGHT IN RACINE

The importance of knowing your history.
Ten Things Romans Used for Toilet Paper – ROMAN MYSTERIES & WESTERN MYSTERIES

Not really the right day to be thinking about it, but if you are…
Tips for Bike Commuting to Work – BLISS TREE

Here you go:

Had enough of hearing how hard composers and musicians’ lives are? So was Rimsky-Korsakov.
Rimsky-Korsakov on the “hardship” of the composer’s life – STEPHEN HICKS

If you liked yesterday’s Ralph Vaughan-Williams, then you’ll love this:

All sorts of great things are appearing on YouTube, including long forgotten TV broadcasts of the magnificent Count Basie band like this 1965 example from the BBC, which almost on its own justifies its existence. Almost:

Oh yeah, it’s NZ Music Month. Anybody else head along to see “old timers” Danse Macabre and Penknife Glides at King’s Arms?

Brazier Noir:

[Hat tips Peter Longfield, Jazz on the Tube, ewald engelen, Geek Press]

Thanks for reading,
and have a great weekend!

PC -

DOWN TO THE DOCTOR’S: “Oh teachers are my lessons done? I cannot do another one.”

This week, Libz leader Dr Richard McGrath wonders what about registering a teacher makes them safe?

Boyish Labour MP and teachers' pet Chris Hipkins seems convinced that if teachers in charter schools aren't registered, children will be at risk and the sky will fall. 

I thank him for his concern. We can all be reassured that where a teacher is registered and under scrutiny of the Teachers Council, our children will be secure...

Registered teacher James Parker admitted at least 74 charges of sexual offending young boys. He is still on the register of teachers.

On January 16 this year, registered teacher Douglas Haora Martin pleaded guilty to making upskirt videos of 17 unsuspecting young women and girls. Despite resigning from Lincoln High School on January 24, the Teachers Council kept him on their register until April 13..

Registered teacher Andrew Loader paid to watch two teenagers having sex, breaking the law because one of them was only aged 16. Could this be the same Andrew Loader who is still listed on the Register of Teachers with expiry in September 2015?

Registered teacher Nova Camp stole $40,000 from Takapuna Grammar Rowing Club, and remains on the Register of Teachers until February 2015.

A registered teacher who tried to arrange to have per school principal “capped”- and whose identity the Teachers Council won't reveal - is considered safe to continue to teach children.

Being a registered teacher did not prevent former deputy principal Norman Foote from sexually abusing a girl from the time she was a child.

A registered teacher - again with name kept secret by the teachers disciplinary committee - admitted having sex with one of her male staff members, signing off the bill for a phone from which he used to ring the TAB, and endorsing his registration despite knowing he was being investigated by CYFS for alleged assault..

Registered teacher Kevin Fraser Keys admitted sexually assaulting and photographing a boy under the age of 16. Oh look, he's still on the Register of Teachers until January 2015. 

Registered teacher Damian Christopher Gillard was charged last year with sexual offences against seven young women.

Registered teacher Rene Alan Chalmers, alleged to have stolen more than $800,000, remains on the register 'subject to confirmation' until June 2015.

And these are just the teachers who didn’t make it into parliament on the Labour list…

So I'm confused. Could Chris Hipkins please explain again just why it is so vital that teachers in charter schools be registered?  How does he think merely being placed on a state register guarantees their safety.

Because it seems the Register of Teachers is beginning to resemble Deborah Coddington's Paedophile and Sex Offender Index more than anything on which any decent person would wish to rely. It's beyond me why Hipkins or anyone else should want to protect these predators and deviants from competition.

Could it be because of some tie-in between teacher unions and the Labour Party? If so, in accepting contributions from teacher unions, the Labour Party is being financed indirectly by kiddy-fiddlers, rapists, would-be murderers and peeping toms. That's real class.

See you next week!
Doc McGrath

‘The Lark Ascending,’ by Ralph Vaughan-Williams

Performed here by soloist Tamsin Waley-Cohen, it’s been voted the most popular classical piece ever:

Inspired by a poem by George Meredith:

He rises and begins to round,
He drops the silver chains of sound,
Of many links without a break,
In chirrup, whistle, slur and shake.

Hear it live with the NZSO this Friday (in Wellington) or next (in Auckland), and points in-between in between.

Prohibition Caused the Greatness of Gatsby

New film The Great Gatsby, a lesser version of an earlier classic rework of F. Scott Fitzgerald’s “Great American Novel,” prompted today’s guest poster Mark Thornton to recall the history on which the book was based…

Baz Lurhmann’s up-to-the-minute adaptation of F. Scott Fitzgerald’s The Great Gatsby is a good movie, but it is no indictment against capitalism, as some may contend. It is rather an implicit condemnation of government prohibition.

When I read the book in high school I did not like it. I found it hard to read, not because it was overly complicated or poorly done, but because of the subject matter. The book (as well as the movie) dwells on decadence, licentiousness, promiscuity, and recklessness, or what was called “luxury” in the old days. I have an aversion to all that, and there was only so much I could take.

There is an important difference between wealth and luxury (in the modern sense) on one hand and the type of riotous over-the-top behaviour on display in movies like The Great Gatsby, Moulin Rouge!, and Leaving Las Vegas.

Having written my dissertation on the economics of prohibition, I now understand the value of The Great Gatsby much better. The decadence on display serves, not merely as titillation for the reader/viewer, but as an object lesson in the evils of prohibition.

The whole plot is intimately tied to the prohibition of alcohol accomplished by the 18^th Amendment to the Constitution. In particular, many aspects of the plot are driven by the black market that developed in the 1920s.

Prohibition made alcohol illegal, but it did not eliminate it. Illegal producers known as moonshiners sold their illegal product to illegal distributors known as bootleggers, who in turn sold it to illegal retail establishments known as speakeasies. Everything had to be secretive. The process was overseen by organized crime syndicates and street gangs who paid bribes to corrupt politicians and law enforcement. Respect for the law sank to an all-time low.

In the world of this black market, property rights were protected with machine guns rather than judges and juries. The stigma against young women drinking in bars at night was displaced by the allure of an exciting night out on the town drinking and listening to jazz. Instead of these profits going to competing entrepreneurs, the money was going into the pockets of thugs and wannabes. Social order was replaced by chaos. This cultural decay was the ironic fruit of the puritanically-motived prohibition movement.

The central character of the story is Jay Gatsby. Gatsby comes from a dirt-poor family and is a big dreamer, as well as a big risk taker. He keeps his past shrouded in a web of lies and half-truths as he sets out to remake himself into a person of wealth and prominence. This is the ideal personality for making it big in black markets.

The mysterious Jay Gatsby indeed does become “filthy” rich by selling illegal booze. During Prohibition doctors could prescribe “medicinal liquor” for their patients for literally dozens of ailments, including alcoholism. Gatsby sees this as an opportunity and establishes a chain of drugstores with the help of organized crime and corrupt politicians.

Alcohol has been an effective remedy for treating a variety of medical problems throughout the centuries. During Prohibition, doctors were paid well for writing the prescriptions and drug stores were also very well compensated for selling “medicinal alcohol.” I could not find records of how many prescriptions were written, but the one I have framed in my office is number E362545 which was issued on 8/13/31 and cancelled in 1932. Here is an image of a prescription from Wikipedia.

This was the heyday for pharmacies. The Walgreen’s chain of drugstores started in the 1920s with 20 stores in the Chicago area, but ended the decade with over 500. I have to believe that it was not so much their great milkshakes, but the pints of Old Grand Dad that they were able to sell at high prices that contributed to its success.

The thing about legal outlets for otherwise illegal products is that there tends to be “diversion.” In other words, a drug store that can legally acquire and sell alcohol can also sell their products illegally to speakeasies which would then resell the alcohol to their customers by the drink. This was clearly happening with Gatsby’s drug stores.

Prior to prohibition most Americans were accustomed to drinking their whiskey “straight” or with water. However, much of the moonshine and bathtub gin that was produced during Prohibition was of high potency, but poor quality. The diverted whiskey, during the Roaring 20s, would therefore have fetched high prices making enormous profits for drug store owners like Gatsby.

To deal with the high potency, bad taste, and sometimes bad smells, the speakeasies experimented with “cocktails,” which combined alcohol with juices, dairy products, and food items. As a result, thousands of different cocktails were invented as the speakeasies competed against one another for the customer’s money.

The Age of the Cocktail might be the only silver lining to come from Prohibition,* other than Fitzgerald’s The Great Gatsby—a testament to how twisted society can become, and how the Jay Gatsbys of the world can reach the stars, with the help of government prohibition.

Mark Thornton is a senior resident fellow at the Ludwig von Mises Institute in Auburn, Alabama, and is the book review editor for the Quarterly Journal of Austrian Economics. He is the author of The Economics of Prohibition and the editor of The Quotable Mises, The Bastiat Collection, and An Essay on Economic Theory.
If you enjoyed this might also enjoy his video lecture,  Prohibition Through the Eyes of Homer Simpson - A Talk by Mark Thornton.
This post first appeared at the Mises Daily.

* Well, apart from the hot jazz pouring out Harlem nightclubs financed by pouring hot booze inside, seen here in another Spike Lee’s joyous depiction of the time, set to Lionel Hampton’s romp Flying Home …

… and in Francis Ford Coppola’s Ellington-fuelled film about the granddaddy of  corrupt clubs, The Cotton Club.

‘Death of a Moa’ by Trevor Lloyd

Here’s a NZ landscape painter from the 19th Century with a sense of humour: Trevor Lloyd. (Do you see it?)  The Auckland Art Gallery apparently has a huge collection of his work, but rarely let it see the light of day.

About this one they say:

Made for the enjoyment of his family, this unique fantasy painting is one of Lloyd's most ambitious works. The last giant moa has fallen, its body watched over by a gathering of native birds and patupaiarehe, mythic Maori fairy folk. The cacophony of squawks and cries is almost audible. Lloyd captures the personalities of the various birds: the pukeko, a little stand-offish, looks on inquisitively; the gregarious kea shares the news with a late arrival still in flight; and the kakapo, notoriously shy and retiring, sits on the outer edge of the group. ('Enduring Nature: Hoki Atu Hoki Mai,' 2004)

Angelina Jolie’s breasts

Never has the disappearance of two breasts caused so much comment, so much of it so completely unhinged.

(Add together celebrity + breasts +cancer and I think you approach the formula for madness.)

Out of many, many candidates, I think this might be the most pathetic:

If true, I believe satirising that sort of ridiculous celebrity worship was part of the point (and, yes, there was one) of this song by late-lamented Australian band TISM. Enjoying this may perhaps be the most appropriate way to mark this inauspicious occasion:

Target your enemies

Just a week ago I talked about Richard Nixon’s Enemies List, and how New Zealand law has been moving towards making it ever easier for the well-connected to target their political adversaries.

As always, America is already far ahead of us…

Castro’s decade-long exercise in brutality

I saw a headline at The Age decrying “Castro’s decade-long exercise in brutality,” and quietly gave thanks that his oppression of Cuban people is finally being recognised by a mainstream media more likely to lionise Castro and Che than recognise their inhumanity.  But even as I clicked the link, I was wondering why it was talking about “decade-long”…

Of course, it wasn’t talking about Fidel Castro’s decades-long imprisonment of the Cuban people, but the decade-long imprisonment by his near-namesake of three women (now released) in his Cleveland, Ohio, basement.

The facts of the latter case are indeed horrific, and horrific on a scale that’s easy to grasp and report. Three women locked since their teenage years in the basement of a monster. Perhaps that’s why the media are all over this horror, one they can easily understand and deplore, whereas the Castro family locking the entire population of Cuba in the basement of their broken dreams has barely warranted a mainstream media mention for years. *

The much larger-scale horror going on in Cuba just continues to pass them by.

* * * *

* It’s even worse. The most recent mainstream mention of the Cuban Castro clan was a puff piece in the newspaper of record about “Mariela Castro, the daughter of President Raúl Castro and Cuba’s premier sexologist,” visiting the Liberty Bell in Philadelphia. The report doesn’t mention whether the crack in the Liberty Bell got bigger.

Child poverty is not rising but falling

John Boy Key is considering funding Hone Harawira’s “Food in Schools” bill, saying, "There is some merit, obviously, for food in schools - the Government has been supporting that in terms of a number of programmes."

But as Lindsay Mitchell points out, and as you’d expect with Hone Harawira (whose whole career is built on artifice), the very bill to which they’re considering lending their support starts with a lie :

From the bill’s Explanatory note:

"Growing levels of poverty in New Zealand have resulted in too many parents being unable to afford to provide their children with breakfast before school and/or lunch at school, or being unable to afford to provide their children with sufficiently nutritious meals before and during school."

The latest data available shows that levels of child poverty are declining:

The shaded area shows that the percentage of children living in households with income below 60 percent of the median … household income (referenced to 2007) has fallen from 37 percent in 2001 to 21 percent in 2011…

So even by the standard of “poverty” used by politically motivated “Child Advocates” (i.e., that “poverty” is a relative thing, measured as a percentage of others’ wealth or income), and despite the loud and repeated claims of these advocates, the number of children in impoverished homes is not rising but falling quite substantially. Fallen by nearly half.

In addition, as Lindsay shows, the hardship suffered by those families under this relative line has got no worse since the mid-1980s.

You’d think instead of talking up “rising child poverty” the so called advocates for impoverished children would be celebrating these results—and they would be, if ending child poverty were their real goal.

Yes, you can buy Claude Megson’s house…

Now for sale by new owners, here's late architect Claude Megson's own house, perched above tree-clad Dingle Dell in Auckland's St Heliers, with views in the other direction out to Rangitoto and the harbour. A simple looking exterior concealing an awful lot of living within.

Megson took the small, boxy, brick house (right) designed by the architect of the Holy Trinity Cathedral, Richard Toy, and transformed it into something magical, something giving the feel of having discovered a particularly poignant tree-filled glade somehow touched by the gods.

Writing about the transformation a few years ago, architectural critic John Dickson said of it, "It is impossible without the process of Megson's imagination to connect the cluster of small, confined rooms of the house as it was to the expansive, multi-levelled, vertical-fissured, spatial-phantasm that it has become."

A new structure was built over the original brick base, with balconies - described by [former Megson student] Andrew [Barrie] as "cages of mesh and steel tube" - projecting from the house out into the treetops… Andrew Barrie says Claude was a world-class architect. "His houses brought a sculptural quality but they were also incredibly tied to the way people live. Usually, it's one or the other and to do both was unusual ... there were few like him."

For Megson a house was a lot more than just a machine for living—the family house for example house should support and enhance family life, celebrating and artistically expressing all its many aspects. 

And English architectural critic Professor Geoffrey Broadbent, writing after a 1992 tour of Claude's Auckland houses had this to say:

"This," I said to myself, "is work of a very high international standard indeed." ...One is constantly struck by the surprise around the corner, the bright shaft of light penetrating from above into the softer glow of the main living spaces -- especially in Megson' own house -- that give his work such very special qualities...
There is an essential "rightness" about Megson's spaces, for pleasant occupation by ordinary, normal human beings. Such things, says Dickson, have gone out of fashion with today's students. Well, so much the worse for the students [and their clients!]. Perhaps it hasn't occurred to them that if they design real spaces for human comfort and pleasure, then even those anguished souls overwhelmed by post-Heideggerian "problematics" about the nature of their existence might, given spaces like Megson's to contemplate that nature of their "Being," come to more positive conclusions! Because that's the point about Megson's spaces; they are life-enhancing.

Broadbent, for once, is exactly right.

Claude built the house for his own family as a classic three-zoned family house: with parents’ realm and childrens’ realm’ linked together through the house’s public realm.  Agent’s photographs suggest the current owners (and vendors) have retained this spatial planning (well expressed in the exterior, as you can see below), but have restored the house and kitchen elements so they are “largely as they were.”

You may buy it through Barfoot & Thompson.

[Photos by Ted Baghurst and Barfoot & Thompson. More pictures here and here.]

[Cross-posted at the Claude Megson Blog]

New Zealand to Outlaw Patents on Software

Guest post by Dale Halling 

According to Kiwi Blog, which calls this “A good move from the Gov’t on patents,” there is a new Patent Bill that will prohibit patents on software.

Logically, this suggests that there is something special about software that is incompatible with patents. In order to determine this, we first have to have a clear understanding of what software is and what a patent is.

A patent is a property right that a person earns by creating a new invention. But what is an invention? An invention is anything created by man that has an objective result. This definition clearly delineates that inventions are not things in nature, or things occurring naturally. An invention, also, is not everything created by man. For instance, a painting or a song are creations of man, but they do not have an objective result. Songs and paintings fall into the category of aesthetic creations. Their goal is to elicit a subjective response and people will react differently.

An invention has an objective result. For instance, a controllable heavier than air powered craft, such as the Wright brothers invented has the objective result of controllable powered flight. Software is a set of written instructions that are converted by a compiler (interpreter) into a wiring scheme that opens and closes transistors. Software that is not converted into instructions is just a bunch of bad writing.

Now that we have a clear definition of a patent and of software, we can examine whether there is something special about software that would cause it to not be patentable. The written instructions of software do not have an objective result, not unless they converting into a wiring scheme. Therefore, software code is not patentable. No country has patent laws that apply to software code. The way this is normally stated is that software per se is not patentable.

If this was all the New Zealand bill was proposing, we could stop here. But all indications are that the proposed law would not allow patents for inventions in which software was used to wire an electronic circuit. As any electrical engineer knows and software developer should know, solutions to problems implemented in software can also be realized in hardware, i.e., electronic circuits. The main reason for choosing a software solution is the ease in implementing changes, the main reason for choosing a hardware solution is speed of processing. Therefore, a time critical solution is more likely to be implemented in hardware; while a solution that requires the ability to add features easily will be implemented in software.

Software is just a method of converting a general purpose electronic circuit (computer) into an application specific electronic circuit. If software is not patentable it leads to absurd results. For instance, if I design a pacemaker using logic circuits, it is patentable. However, if I use a microcontroller to do the exact same thing, it is not patentable.

Software per se is not patentable. Executed software is just a way of wiring an electronic circuit. Electronic circuits have objective results, are a creation of man and therefore an invention. There is no logical reason to distinguish between software-implemented inventions and other inventions. This bill is based on emotion or an anti-property rights agenda or both.

Dale Halling is a rarity among bloggers. In addition to his law degree, he hold a BS in Electrical Engineering and an MS in Physics. He is an attorney specialising in intellectual property, and the author of the book “The Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovation.”

Will the Housing Accord cure the land banks?

Guest post by Phil Hayward

Now that a “housing accord” between the government and Auckland Council has been announced it’s worth asking, what’s been agreed and will it make any real difference. Last year after the  NZ Productivity Commission released its findings and recommendations over its Inquiry into Housing Affordability, Phil Hayward said they

completely fail to identify the extent of market freedom surrounding property development and the supply of land for it that is essential to ensure housing affordability and economic stability. There is a very real danger that “releases of land” will not be of sufficient quantity to eliminate the “gaming” by incumbent land owners and land bankers that leads to very high levels of planning gain, and hence may merely shift NZ from being a “housing bubble market” as a consequence of outright under-supply, to one in which over-building is possible along with the price inflation.

What’s changed?

The crucial factor determining the success of any “solutions”, is whether it is possible to forestall by market means the power of the original owners of land zoned for development to “hold out” for whatever prices the market can stand.

To restore affordability, within the area in which development is permitted to take place there needs to be enough willing vendors of land (at prices un-inflated by expectations of capital gain over and above normal rural values) to meet the “supply quantity” required for growth in the housing market. Of course any growth boundary that meets this requirement would have to be so loose that it might as well not exist. But there is no example in the world of a city with a “20 year” growth boundary (or less) that does not have a problem with unaffordable housing stemming from “planning gain” in the price of greenfields land.

There is not one "urban fringe property developer" who is interested in fighting for reform of growth containment regulations once they are entrenched. None of these people anticipated the consequences in the first place. If they stay in business at all subsequently, it was by becoming hostages to the racket and becoming rent-seekers themselves. That is, they are forced into a gladiatorial bidding war for the available land within the Urban Growth Boundary (most of the owners of which had no intention of selling it within the planners alleged "20 years supply" period or whatever) and once they have secured "land banks" at massive cost (including finance carrying costs), reform would bankrupt them.

In any case, their industry has become very high risk and many of them will become casualties anyway.

Within any given area of farmland, there is only ever a fraction of land owners intending to sell anyway - due to retirement or change of occupation - and the closer to the existing city fringe the land is, the closer to zero is the probability of the owners of that land are not anticipating considerable capital gain.

Academic analysis frequently misses the point that the price of housing in new developments does not inevitably have to be set by “what participants in the market can stand” – if it is set by “the most competitive price at which developers can turn farmland at farmland prices into developed housing,”, you will then have a happy condition of “consumer surplus” in housing just as you have in cars and computers and cellphones. The absence of consumer surplus and the pricing at “what participants in the market can stand” is a case of what some economists call “super profits” or “monopoly rent.” ¹

There is no justification to be found by analysing real-life data for banning the “splatter” development that results from the absence of an urban growth boundary or prescriptive zoning. The cities that have freedom to develop in this way do not suffer from any worse traffic congestion, or any less efficient commute times, or any less sustainable fiscal position than cities that suppress this freedom. In fact, all the analytical literature indicates that the end result is greater efficiency of the urban economy, along with a vastly greater housing affordability; this is because the best use of still-undeveloped land and the most cost-effective provision of infrastructure is far clearer after some years of gradual market-led conversion of land from one use to another.

By contrast, planners’ insistence on contiguous “carpet” development and heavily centralised infrastructure networks brings a whole host of negative consequences, not least for the cost of infrastructure – the very thing that their central “planning” allegedly minimise….!

In fact the best solution to our housing affordability, planning, and NIMBYism impasse, would be “new towns”—towns, hamlets and new villages built outside the rural-urban ring-fence with their own self-contained infrastructure. Ebenezer Howard, the “father of urban planning,” was obsessed all his life (in the first half of the 20^th century) with the elimination of “planning gain” by building his “new towns” on legally purchased farmland far enough away from cities that no higher land price expectations existed. He also intended each “new town” to have a balance of residences, jobs, and amenities.

Ironically, it is modern free market versions of this that have been far and away the most successful in the USA. For example, “The Woodlands”, near Houston. The initial purchase of rural land at dirt cheap prices, means that all sorts of “amenity” can be provided at minimal opportunity cost that needs to be recouped in the price of the sold sections. A combination of housing affordability, low urban density, short average trip times, high local amenity, and high fiscal sustainability sounds too good to be true. But our intuitions are too shallow. The expectation that really IS too good to be true, is the expectation that it is possible to achieve housing affordability, high urban density, short average trip times, high local amenity for all, and high fiscal sustainability; through “planning” – when the first effect of the planning is the inflation of the raw land cost by over a thousand percent.

The best solution to our housing affordability woes and associated unintended consequences, such as an epidemic of ultra-long commutes from rural towns to jobs in the unaffordable city, would involve a few new towns like “The Woodlands” springing up in the superabundant stretches of undeveloped land with which NZ (one of the world’s most lightly populated countries) is blessed. The existence of these highly competitive alternatives – for both home buyers and businesses (hence the excellent jobs-housing balance) – would soon take the pressure off the market in the existing cities, strangled as they are by NIMBYism as well as misguided planning.

Planned “releases of land” however for a specific 10,000+ new homes per year in highly specific locations, could be a failure as a “housing affordability” policy per se. When we analyse previous housing bubbles and crashes around the world, we find that the most volatile ones are those in which the price inflation was accompanied by frantic amounts of building. This seemingly contradictory combination is the result of insufficient market freedom to convert cheap rural land to urban use without its original owners holding out for “planning gain.”

“Housing affordability” is achieved most spectacularly post-crash under these conditions, as in Ireland and Spain; but this victory is a Pyrrhic one.

It is actually a lesser evil, economically, to have an outright undersupply of homes.

Phil Hayward is a Wellington housing researcher and commentator.

1. I hate using terms commonly associated with Marxism, by the way, but they are the technical terms understood by the economics profession, and no others have been devised instead.

NOTE: The problem Phil describes above is exacerbated by the way money is borrowed into existence , with the monetary inflation this produces occurring first in heavily indebted assets like land. Which means a large part of what is thought of as “capital gain” is in reality just early-stage price inflation.

The Man Who Fell Back to Earth

Everyone’s favourite astronaut Chris Hadfield, who’s been tweeting from the International Space Station everything from pictures of earth’s cities to showing how tears work in zero gravity, bows out at the station with a small rewrite of the obvious cover song, and some  non-special effects the original music video maker could only dream about:

Despite the good Commander’s voice being better suited for space work than singing, David Bowie tweeted his endorsement.

The first music video shot in space now has over 1.8 million views!

“No” to racism

When One-Law-For-All is put to voters, it seems New Zealand voters can sometimes have more common sense than their political servants often give them credit for.

Case in point: The recent rewrite of the Local Government Act required councils to hold a referendum before setting up race-based seats—and although largely unreported the results are beginning to roll in.

Most recently, from the Hauraki Plains, south-west of Thames…

Results for the Hauraki District Council Maori Representation Poll that closed on Wednesday May 1, 2013, clearly indicated the majority of those who voted do not support separate Maori seats.
    Of the 5284 (39.12%) electors who voted, 4249 (80%)were against the idea…

And earlier, from Wairoa…

The population is 61 percent Part-Maori.
Guess what, 55 percent of respondents voted against race based seats.

From Nelson, last year…

In accordance with section 86 of the Local Electoral Act 2001, the result for the Maori Representation Poll held on Saturday 19 May 2012 is:
Votes cast AGAINST the Proposal 12,387 (79%)
Votes cast FOR the Proposal 3,192                (20%)

And in the Waikato, earlier last year…

the numbers were clear: of the 12,672 (30.16 per cent) electors who voted, 10,111 (78.9%) were against the idea, while 2517 (19.8%) favoured it . Waikato Mayor Allan Sanson said the poll sent a clear message that the district was not ready for separate Maori seats.

“Not ready” my arse. This is the sort of patronising pap put about by Euro politicians when voters reject their next round of Euro-delinquency.  As if folk just haven’t been sufficiently warmed up to vote the right way.

John Ansell summarises the spate of votes on related race-based issues over recent months:

It’s not that voters are “not ready” to accept these race-based measures. It’s that politicians are not ready to accept that an overwhelming majority of the voting public are heartily sick of law based on racial preference.

Given that mainstream politicians are so intent on ignoring this principled position, it would seem that any party running on a ticket of One Law For All could create the sort of shock among race-based political thinking here as UKIP has among Euro-minded political thinking over there.

Do I hear hooves?

Thought for the day

[Hat Tip KN]

Housing: Is smaller better, or even necessary?

The “housing accord” agreed to between the Auckland Council and the National Government’s Nick Smith is being talked of as a victory for National’s wish to extend the city out into green pastures over the Auckland Council’s wish to intensify existing built-up areas. (A phony dichotomy, as I’ve said before.)

Those seeing it as a defeat for the council bewail their lack of success in getting agreement on “quotas for affordable housing to be included in the accord.”

Let me here just focus on one grave misconception about what makes housing affordable, because Auckland’s planners apparently have no idea.

In pushing for smaller, cheaper, cooky-cutter shoeboxes as their epitome of what affordable housing should look like, they’re doing a simple calculation while ignoring the reality of how a housing market actually works.¹ Their calculation is done—need cheaper houses; therefore need fewer square metres per house; therefore mandate higher densities and smaller cooky-cutter shoeboxes.²

Little apartments, made of ticky tacky. Or “innovative techniques” used to build better shoeboxes.

But this ain’t necessarily so, and it ain’t necessarily so because it ignores the true dynamism of urban housing markets.

You see, in affordable, dynamic housing markets, most affordable housing coming onto the market is not new, smaller, cheaper housing—it’s superior-quality “second-hand” housing that is coming onto the market as a result of the vendor “moving up.”

This is important to understand, because building cheaper, smaller, shoeboxes simply means you’re building the slums of tomorrow.  Whereas building newer quality housing into which people “moving up” can move into—leaving their own house available and affordable for another buyer—over time increases the overall quality of the city’s housing stock. In other words, if you want quality affordable housing, then make it possible to build larger, quality, newer housing that appears on the face if it to be unaffordable.

This seemingly contradictory point can be understood only when you learn about this concept of “churn.”

“Churn” in this context refers, as I said, to the chain of purchasers who are all “trading up” after a new house is bought and folk move into that house and out of their old one—leaving their old house empty for someone else to move into, which leaves their house empty for someone else to move into, which leaves their house empty for someone else to move into, and so on and so on right on down the line.  This is “churn.”

In a healthy housing market, one house purchase by one family can start off a chain reaction of up to ten, twelve or even twenty moves further down the line as each family moves out of their old and up to their new home.

Why do I say “move up”? Because this is the housing equivalent of the weird double-thank-you moment we talk about in economics:

How many times have you paid $1 for a cup of coffee and after the clerk said, "thank you," you responded, "thank you"?
There’s a wealth of economic wisdom in the weird double thank-you moment. Why does it happen? Because you want the coffee more than the buck, and the store wants the buck more than the coffee. Both of you win.

And the proof that you win—that you both valued the exchange—is that each exchange happened voluntarily.

It doesn’t just work for coffee. Because when you decide to sell your current house to move into a new one (new to you), it’s because you want the newer place more than the old place—and your new buyer wants your old place more than their old place, and so on down the chain. You each want the new place because in your minds your new housing situation is going to be better for you than your existing housing situation.

It’s just the same for every buyer in the chain.

And the proof that you win—that you both valued the exchange—is that each exchange happened voluntarily. Increase the possibility of more exchanges like this taking place, and you increase the number of times people are able to improve their circumstances.

So every time a new house is built and purchased, of whatever value, that opens up opportunity for many other families to make their situation better.

So while the buyer of the affordable $300,000 house may not know it, but the construction of that that new $800,000 house could possibly be what just made his own life better. He’s at the end of a “chain of churn” created by that first purchaser and his vendor both saying “Thank you!”

This is what happens when the housing market is not broken by regulation, as it is now.

Here’s something else that seems contradictory until you think it through a little: It turns out too that in a healthy housing market a new more expensive home creates more openings down the line than a cheaper more affordable home does—up to twenty housing moves for an upper-quartile home as compared to less than five or six for one in the lower price quartile--meaning, strangely enough, that the more expensive houses that are built the more folk actually benefit.³

Which means, if the housing market were less constrained than it is now, that  its entirely possible the buyer of the affordable $300,000 house has acquired his opportunity because of the construction of a new $1.8 million house!

If that idea makes your head hurt, then consider this question: is it better in general to build better houses or lesser houses? Wouldn’t we all agree that better quality is far better than lesser? So as better houses costing more are built and folk move up to what in their own view are better houses, more people are actually helped and the overall housing stock for everybody is improved.

Isn’t this better than flooding the market with houses of lower cost and lesser quality, which actually produces fewer moves helping fewer people, and resulting in the end only in having created the slums of tomorrow?

The real answer to affordable housing then is still out there.

The answer is to fix the broken market.

And how do they do that?  They stop pretending either the council’s planners or the governments know what they're doing, and they both get the hell out of the way.

* * * * *

1. For those paying attention, this is yet another example of “the seen and the unseen.”  Newer “affordable” apartments mandated by quota would be seen—and seen as a direct result of the council’s quota. Cue photo opportunities all round.
Whereas the number of affordable opportunities opening up as a result of newer, more up-market housing being built, is largely unseen—and therefore mostly unavailable for politicians’ photo opportunities.

2. Yes, building costs also need to come down to make medium-cost spec building profitable again, because it’s speculative builders who until recently provided the bulk of the NZ housing stock, and who are now priced out of the medium-priced market. Until costs come down, the only place a spec builder can be sure of his margins is in the market for higher-priced housing, where prices are high enough to cover the rapidly stampeding building costs.

2. Of course, in a healthy market, housing prices don’t bubble up like New Zealand’s have in recent years.

Graph from Rodney Dickens’s report “Quantifying the Housing Affordability Time-Bomb”

Instead, they decline gently, just as all commodities do in healthy markets enjoying stable, un-inflated currencies.  Just like New Zealand & Britain were in the late 1800s…

“Course of Prices in New Zealand, 1860-1910,” from Muriel Prichard’s book ‘An Economic History of New Zealand’

FRIDAY MORNING RAMBLE: Brought to you by Henry Ford [updated]

The Ramble this week is brought to you by Henry Ford, who said:

"Anyone thinking they could be happy & prosperous by letting the
gov’t take care of him better take a closer look at the American Indian"

Since the first reading of the fast-tracked GCSB bill allowing them access to our homes passed this week, this suddenly seems directly relevant. Simple answer: “yes.”
Are All Telephone Calls Recorded and Accessible By US Government? – Glenn Greenwald, GUARDIAN

“Len Brown’s apparent moderate approach to rates increases should not be allowed to go unchallenged. Especially when he tries to curry favour with voters by boasting of an ‘average’ rates increase of 2.9% this year. Many ratepayers will be hit with increases far in excess of this figure.
    “Rates increases differ across the Super City region as a result of aligning rating levels between the various different former Councils. This means residents of former Councils that taxed relatively prudently, such as the residents of Orewa, get smashed with increases of 10% on top of last year’s 10% increase. Residents of high tax former councils end up getting a decrease in rates. I say every ratepayer in Auckland should be getting a rates decrease!..
    “A sense of fiscal sanity needs to be restored in the next Auckland City Council. Voters will not obtain this by electing the same washed out crew of career councillors who waste millions of dollars on trains that go nowhere and institute rules that add tens of thousands of dollars to the cost of building a new home.”
Rates Increase Anything But Average – Stephen Berry, AFFORDABLE AUCKLAND

“A city—especially a great one—cannot really be seen.”
 The Invisible City. Sandy Ikeda, THE FREEMAN

“Urban populations typically vote for greater government control and hence more interference than rural populations do. The paradox is that city people are less restrained, yet they seek political interference in their own and others’ lives.”
 The Paradox of the Illiberal Cities – Alex Moseley

Mind you…
Why Too Much Data Might Actually Protect Your Privacy – Sam Volkering, DAILY RECKONING

I must confess, my own jury is still out on this one.
Why 3D-Printed Untraceable Guns Could Be Good For America – Paul Hsieh, FORBES
[UPDATE: BREAKING: Pentagon Removes 3D Gun Plans From Internet Site – Robert Wenzel, EPJ

Something for young folk and tertiary ministers to think about.
The Jobs Of The Future Don't Require A Uni Degree – FORBES

I’ll give you a clue—they’re not arts or architecture graduates.
And The Highest-Paid College Majors Are… – WALL STREET JOURNAL

"A movement whose main promise is the relief from
responsibility cannot but be antimoral in its effect. . . ."
- Hayek on the welfare state

It’s true. Foreigners buying land is good for all of us. Except the Green Party.
Economic stupidity? Yes ..... by the Greens – Paul Walker, ANTI DISMAL

Scientist Stephen Hawking is boycotting Israel. I’m not sure he’s thought this through.
Look Who's Talking – TIM BLAIR’S BLOG

“The crusades of the anti-legal high lobby are doing far more harm than good. If the anti-synthetic cannabis lobbyists are to be believed, each new type of product is getting more harmful and damaging. “That is the effect of prohibition! The first major legal high product was BZP and was largely safe. It never resulted in any deaths but was a victim of media and communitarian scandals. The early cannabis substitute products also had negligible negative health effects but also got the chop by the Government. Now each product that gets banned is replaced by something allegedly worse. If this doesn’t prove the destructive power of prohibition, I don’t know what else can!
Libertarianz: Prohibition Won’t Solve Legal High Issues – Dr Richard McGrath, SCOOP

UKIP are still wrong on immigration, but right on prohibition.
Nigel Farage on Drug Prohibition – Sean Gabb, LIBERTARIAN ALLIANCE

A good news story: “War…is harmful, not only to the conquered but to the conqueror. Society has arisen out of the works of peace; the essence of society is peacemaking.”
Mises on War – MISES DAILY

More good news: human progress ends poverty, if we’re free to.

Wonder why private property is good and socialism hates it? It's about the tragedy of the commons ...
KWR: Crony Capitalism, Tragedy of the Commons, Sports Symposium, Competition is Good, Pixar – Virginia Murr, KAIZEN WEEKLY REVIEW + STEPHEN HICKS

Banker John Allison built the bank that didn’t fail—and didn’t need a bailout.
Business Hero John Allison: BB&T — The Bank That Atlas Built – Donald Luskin & Andrew Greta, CAPITALISM MAGAZINE

We see it  so often we take it so much for granted.  (And Paris still gets fed.)
Regulation through Competition – Don Boudreaux, CAFE HAYEK

Since the Japanese central bank began keeping its promise to double the money supply, all those promises have ended up in a stock market bubble.  You can just tell it’s going to end badly.  And then what…
The Real Reasons You Should Care About Japan – Chris Mayer, MONEY MORNING AUSTRALIA

Only one country in European Union with a recorded government surplus last year. Have a guess.
Sector: General Government – Faisal Islam, TWITPIC

Wow. That’s a lot of regulations.
# Red Tape Tower

Did you know it was Friedrich Hayek’s 114th birthday this week? Here’s the Nobel Prize winner talking about one of his key contributions, on the economics of knowledge.
Happy 114th Birthday, Hayek = ADAM SMITH INSTITUTE

Since we were talking last night at the Uni Econ Group about the history of the Great Depression, hopefully debunking a few myths along the way, I figured you folk might be interested in some of the shorter readings. So here you go:

• How Government Prolonged the Depression – Harold Cole & Lee Ohanian, WALL STREET JOURNAL
• Great Myths of the Great Depression – Larry Reed, MACKINAC CENTER
• Herbert Hoover’s Depression – Murray Rothbard, MISES BLOG
• The Dangerous Return to Keynesian Economics – Steven Kates, QUADRANT
• Regime Uncertainty: Why the Great Depression Lasted So Long, and why Prosperity Resumed after the War – Robert Higgs, INDEPENDENT INSTITUTE
• Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s – Robert Higgs, INDEPENDENT INSTITUTE
• From Central Planning to the Market: American Transition, 1945-1947 – Robert Higgs, INDEPENDENT INSTITUTE
• The Hoover-Roosevelt Depression Revisited – John Cochran, MISES DAILY
• The Great Depression: Mises vs. Fisher – Mark Thornton, QUARTERLY JOURNAL OF AUSTRIAN ECONOMICS

This is timely, given its relevance to last night’s discussion.
Fed’s policy of price stability damages US economy – Frank Shostak, COBDEN CENTRE

“As the graph below makes clear, in duration – if not necessarily in scale – the current economic crisis is now worse than the Great Depression. There are realistically just two schools of thought as to how an economic depression should be tackled…”
Still stuck in the Middle Ages – Tim Price, THE PRICE OF EVERYTHING

Author David Stockman “is a myth buster par excellence. He busts myths that are cherished by Democrats and myths that are cherished by Republicans, and some cherished by both. Never pulling any punches and always happy to name names, he exposes as complicit in the deformation of American capitalism politicians, central bankers, and self-important economists of the Keynesian, monetarist and supply-side persuasion. He also identifies the many crony-capitalists, who shamelessly exploit the system’s many deformations for their own gain. But Stockman not only identifies the villains – the advocates and profiteers of unsound money – he also gives us the heroes, the defenders of sound money, people like Dwight Eisenhower, William McChesney Martin, and Paul Volcker, even if their efforts ultimately did not avert the corruption of American capitalism.
    Here are the main myths that Stockman exposes…”
Book Review - David Stockman: The Corruption of Capitalism in America – DETLEV SCHLICTER

Politicians’ maths:

Speaking of debunking myths, Reason magazine often has good series on American immigration.
Don’t Believe What You’ve Heard About Immigrants and Welfare – Shikha Dalmia, REASON
No Skills? No Problem! – Veronique De Rugy, REASON
5 Reasons Why Low Skilled Immigrants are Good for the Economy – Paul Detrick & Shikha Dalmia, REASON

I liked this little story about Margaret Thatcher and Atlas Shrugged.
A "Delightful" Dinner with The Iron Lady – John Aglialoro

Warren Buffett is now tweeting. If you call two tweets in seven days tweeting.
https://twitter.com/WarrenBuffett

I hope Warren doesn’t get distracted by the technology!
Brain, Interrupted – NEW YORK TIMES

Because…
How Twitter Killed Thought - The return to blogging – Joe Green, MACGREGOR MEDIA

Nice summation of 5 parenting blogs.
How to Parent with The Best – IMPETUS ENGAGEMENT

He had me, right up until the last line.
Talentless, pert-breasted reporters don't know the world, let alone journalism. – Geoffrey Barker, SYDNEY MORNING HERALD

And I love the images appearing daily in the 365 Days of Organic Architecture that Organic Design Operatives are running. For example…

Turns out it wasn’t invented the way you’ve been told.
The Lies You've Been Told About the Origin of the QWERTY Keyboard – Alex Madrigal, ATLANTIC

Researcher maps music listening to exam scores. Who’s smarter, Beethoven or Ben Folds listeners? Radiohead or Rage Against the Machine? Justin Timberlake or Jim Hendrix?
Music That Makes You Dumb

It truly was a bargain in its day.
10MB system, only... – DANGEROUS MINDS

Photo Gallery of the Odd Contents of Gitmo's Library:
Guantanamo prison library books for detainees – TUMBLR

Answering the important questions since 2008.
So, how much cocaine can actually fit up your arse? – DANGEROUS MINDS

Yes, it’s the world’s smallest movie. Made out of atoms!
Tiny Toon: IBM Makes a Movie Out of Atoms - TIME

There’s plenty to like without even mentioning beer!
Six Things I Really, Really Like About Beer, Part One – Neil Miller, BEER & BREWER
Six Things I Really, Really Like About Beer, Part Two – Neil Miller, BEER & BREWER

Cheers, and thanks for reading!
PC

[Hat tips Geek Press, On Liberty Street, Dim Post, CatallaxyFiles, Dangerous Minds, Clay Steadman, Virginia Murr, Faisal Islam, WFMU, Erik Johnson, Harry McCracken, Craft Beer Capital, Hayekonomics, Paul Hsieh , Lenore Skenazy, Joe Bastardi, David MacGregor ]