Friday, 7 December 2012

Friday Morning Ramble: ‘Gangnam Style’ edition

So you’re a YouTube sensation. The world’s biggest. But how much money do you make from that?  Turns out new media can be more lucrative than old.
Cashing in Gangnam Style on YouTube fame – NZ HERALD

If your kid doesn’t do religious studies, they get put next to the rubbish bin.  Not in Mississippi, but in New Zealand.
Bible-class stance dismays father – NZ HERALD

“Tomorrow marijuana legalization begins to take effect in Washington state. Adults 21 or older will be allowed to possess up to an ounce for personal use and consume it privately… In Colorado, meanwhile, legalization of possession (also up to an ounce) and home cultivation (up to six plants) will take effect sometime during the next month… And last night the Boulder City Council rejected [a ban on pot stores] (for now, at least). Councilwoman Lisa Morzel explained that ‘invoking a ban would be so nondemocratic and would provoke the wrath of the public to such an extent that it would not be a good idea politically’."
Tomorrow Is Pot Legalization Day in Washington – Jacob Sullum, HIT & RUN

Meanwhile, back in New Zealand…
The Daktory is now closed – THE DAKTORY

…and eleven years after switching off Switched on Gardener—eleven years!—the police struggled to get a jury to convict.
Switched on Gardener: to what purpose? – Russell Brown, HARD NEWS
4:20 News - Law & Gardens Edition – GONZO FREAKPOWER BRAINS TRUST

Treaty settlement after Treaty settlement after Treaty settlement. And here they all are…
Treaty SettlementsKIWIBLOG

Bloody awful architecture, but innovative site planning. This will certainly transform the middle of Newmarket.
Broadway Junction – EYE ON AUCKLAND

Yes, the Green Party is the party with an Energy spokesman who doesn’t like energy.
Thanks for nothing Green Party – KEEPING STOCK

A free trade agreement is being negotiated, and Jane Kelsey is protesting. Again. “What I have heard is…….Jane Kelsey. Jane Kelsey. Jane Kelsey. Jane Kelsey. Self-professed trade expert. Alleged (at least practicing) academic… She was popping in to the function at the Maritime Museum to swig a glass of wine before heading back outside to join the protesters for a spell. ‘We hate this process…..just a splash more please…must rush…placards to pose with.’
The Trans Pacific Partnership is about real people creating real jobs and trying to compete in a cutthroat international environment. Jane Kelsey wouldn’t care. She doesn’t need to make anything but noise. The rest of us will just make do, tune out the patronising ideological lectures about how we should be living our lives and running our economy, and hope that TPP becomes yet another milestone in our international trade journey.”
‘Zip It Sweetie’ – Macdonald dishes it to Kelsey – Penny McDonald, NZINZ.COM

He’s right you know. Our National Anthem is a dirge.
Bob Jones on the National Anthem – KIWIBLOG

And you wonder why I mainly only blog during working hours?
Kiwis spend full working day on social media – NZ HERALD

Where are the best places in the world to born in 2013? Well, The Economist reckons New Zealand’s in the top ten.
The lottery of life – ECONOMIST


“Filmmaker Michael Moore received $841,145 in tax incentives from the State of Michigan to make Capitalism: A Love Story, a documentary against corporate welfare, the New York Times reports.”
Michael Moore is a hypocritical bludging ratbag – WHALE OIL

“One thought that occurred to me when thinking about reaction to the Leveson Report - which calls for statutory regulation of the UK press - is that those journalists frightened of such regulation, and concerned - rightly - about the dangerous consequences have had a very sharp lesson in the problems of regulation.”
A teachable moment for the UK media? – Jonathan Pearce, SAMIZDATA

No, New Yorker, capitalism did not cause the Irish Potato Famine.
Starving for Historical Accuracy – Don Boudreaux, CAFE HAYEK

Which nuclear bomb effort? Oh, that  nuclear bomb effort.
Alarming evidence points at Iran nuclear bomb effort – NEW SCIENTIST

Where did Syria’s chemical weapons come from? From the WMDs Iraq “never had.” (Which WMDs? Oh, those WMDs.)
Syria's Chemical Weapons Came From Saddam's Iraq – INVESTOR’S BUSINESS DAILY

Muslim’s best friends are not Jews….

Repeat after me: immigrants are a blessing, not a curse.
Four Easy Ways For Republicans To Attract Immigrant Voters – Jim Powell, FORBES

A bit late now, George.
Praising Immigrants, Bush Leads Conservative Appeal for G.O.P. to Soften Tone – NEW YORK TIMESimage

Speaking of blessings, George Reisman has a new book you can buy inexpensively on Kindle… Reviewer Thomas Woods says, "I love reading George Reisman. I find myself cheering as he methodically dismantles his anti-capitalist opponents with cool and devastating logic. This book is no exception. Reisman exposes the economic errors of the enemies of the free market in his inimitable way, and wipes the self-righteous grins off the faces of those who would destroy the greatest engine of earthly progress and civilization the world has ever seen."
With essays on Occupy Wall Street, the Global Financial Crisis, Racism and much more, it is the perfect introduction to a brilliant thinker.
The Benevolent Nature of Capitalism and Other Essays – George Reisman, AMAZON KINDLE STORE

See how benevolent capitalism is…
"The idea that you could openly sell things that help women achieve orgasm is pretty new." – HIT & RUN

“The main reason for the 20 per cent [of the world's population] consuming 80 per cent of resources is that they produce 80 per cent of resources.  The 80 per cent consume only 20 per cent because they only produce 20 per cent of resources.” – Johan Norberg
Quotation of the Day… – CAFE HAYEK

“Back in 1998, to call Kyoto a failure led to being called a skeptic
(denier hadn't yet been invented!). Today criticizing Kyoto is the norm.”

- RogerPielkeJr

Climategate's Michael Mann debates Climate Depot's Morano on Live BBC Radio: Mann: 'Morano's a hired assassin' -- Morano: 'Mann plays the part of martyr very well.'
Transcript – CLIMATE DEPOT

Discover the science behind fracking and why water contamination from fracking cannot happen….

“We all have been following the dance in Washington about the budget problem that makes headlines every day about how Congress and the Obama Administration are heading for a fiscal cliff. Savvy political observers say that Obama has the upper hand in this fight to lay more taxes upon the rich. The more frantic say that if we fall off of that cliff we’ll be in a new recession. Blah, blah, blah.
    “That is all BS and we all know that. Or we should. I’m at the point where I think the fiscal cliff might be fine… The real problem is spending.”
Let’s Fall Off The Cliff – Jeff Harding, DAILY CAPITALIST

“Greece is in a pickle. Borrow-to-spend is as dead as last year's fish. Tax-to-spend cannot replace it. So now what?
This piece shows their employment picture. They went from 4.6M people employed in 2008 to 3.7 today. One in five people who were working four years ago is not working now… (By the way, Zero Hedge's suggesting that if Greece could devalue their currency, and thus destroy what capital may remain in the hands of savers, employers, and banks, this would help improve their employment picture. For a site that tries to go against conventional wisdom, this is straight out of the Keynes/Friedman playbook—and dead wrong.)” – Keith Weiner
Greek unemployment hits escape velocity – ZERO HEDGE

No, people, Britain is not undergoing “austerity.” Tory Chancellor George Osborne increases the debt every year. “About £600bn – around £10,000 for every man, woman and child in the country – will be added to the national debt in Osborne’s fiscal splurge. If this is austerity, it is almost impossible to imagine what largesse would look like.”
Our Ballooning National Debt – STEVE BAKER MP

“There are two ways to conquer and enslave a
nation. One is by the sword. The other is by debt.”
- John Adams


clip_image001Brazilian modernist architect Oscar Niemeyer, the designer of Brasilia, has died. Many lovers of architecture might say that’s a good thing.
Oscar Niemeyer, architect of the 'Brasilia' project and UN Headquarters, has died at 104 – AGI.IT

How to talk to a progressive, a conservative and a libertarian.
Kling on civilized discourse – Russ Roberts, CAFE HAYEK

“A scientist studying dopamine has discovered that it appears to be more about motivation than specifically pleasure - which has some interesting implications for research on the use of drugs like cocaine and methamphetamine.” And on motivation.
UConn Researcher: Dopamine Not About Pleasure (Anymore) – U CONN TODAY

In all your important endeavours, don’t aim just for a “pass.” Don’t aim just “not to fail.” Aim for mastery.  (Lack of mastery is not failure; “your work is simply incomplete.”)

So what the heck is “business intelligence”? “'Why have a computer? Why use Excel? Why keep a list of customers and sales? It's simply numbers and names. It's the data that the computer allows you to get at and view, turn it into information and knowledge that allows you to make decisions.
    It's when your business is able to look at, manage, and handle this data that it turns into information. And information translates into actual knowledge that you can then base your business decisions on. Using your data can help you cut operating costs, improve customer service, overcome future problems…. Business Intelligence software is geared towards allowing you to get to the information (and make decisions) quickly and easily.”
What the heck is business intelligence? – Debbie Mayo-Smith, NZ HERALD

If the Mayans and Douglas Adams are right, the Vogon Constructor Fleet ends the world on 21 December 2012. I wonder how Ford Prefect would spend the last two weeks.

imageI think Nicholas Dykes likes Lindsay Perigo’s new book. “An excellent book: I’d give it a five star rating any day… The hallmark of his book (highly unusual in the over-serious world of Objectivism) is provocative fun. Very well-written, always entertaining, and often thought-provoking, Total Passion scans the modern world with the eye of a Voltaire; subjecting the pretentious in politics, religion, art and academia to some of the most scathing invective I’ve ever read... The book grabbed me from the start. In Chapter 1, under “NIOF Reconsidered” Lindsay suggests that libertarians should suspend their principle of the Non-Initiation of Force in order to rid the world of vegetarians, teetotallers, and especially academics, who “flatulate with footnotes, quiver with equivocation, warble with waffle, simper with sophistry, vibrate with verbosity, pulsate with pomposity” – I laughed and laughed. Shortly afterwards, in “Sunset …. or Dawn?”, a collection of fanmail from his readers and listeners, some of the sentiments were so moving I found tears coming to my eyes. An author who can make a new reader both laugh and cry in his first chapter is surely doing something right.”
'Total Passion for the Total Height,' reviewed by Nicholas Dykes – SOLO

“Oh look, another ridiculously fantastical utopian scheme from a "’libertarian anarchist’ in a prominent libertarian magazine.” – Diana Hsieh
Panarchy: An Idea Whose Time Has Come? – FREEMAN ONLINE

“A central topic of philosophy throughout the ages has been whether human beings can trust their minds, including their sensory awareness and thinking… But if you just think for a moment, this is nonsense.”
On Doubting One’s Mind – Tibor Machan, TIBOR’S SPACE

The worst sex you've seen (in print).
Sex doesn't get worse than this: Nancy Huston's  Infrared deserved to win the Bad Sex Award 2012 – INDEPENDENT (UK)

Pretend that you’re much cooler than you really are with Slang Flashcards—from the Onion Store.
New Slang Flashcards – THE ONION

The passing of pianist/composer/jazzman Dave Brubeck yesterday “reminds us how important it is to view a figure like him in relation to his time.
“Luckily we have BBC4’s 2009 documentary, 1959: The Year That Changed Jazz to do just that. Produced by documentarian Paul Bernays and UK jazz DJ Jez Nelson,1959 scrutinizes the impact of Brubeck’s classic Time Out album alongside three others from that year: Miles Davis’s Kind of Blue, Charles Mingus’s Ah Um and Ornette Coleman’s The Shape Of Jazz To Come.
“The main Brubeck segment starts 12 minutes in, and the doc explores both the racial politics inherent in the Brubeck phenomenon, and the influence of his band’s groundbreaking 1959 tour of the Soviet Bloc, Mideast and South Asia on Time Out. But the whole hour is worth watching, if only for the compelling close-readings of masterpieces like Davis’s iconic “So What,” Coleman’s intense “Lonely Woman,” Mingus’s firey “Fables of Faubus.” The doc’s juxtaposition of Brubeck’s ascendance to Mr. Cool-ness against Coleman’s Cold War-tinged urgency is also a nice touch.
“With an interview roster that includes Hal Wilner, Lou Reed, Stanley Crouch, Charlie Haden, Sue Mingus, Herbie Hancock and Nat Hentoff, 1959 offers up some crucial background as to what made Brubeck and his contemporaries what they were.”  -  Brubeck in Context: The BBC's '1959: The Year That Changed Jazz'

And finally, next time an expert tells you you’re not qualified to know…

[Hat tips Keith Weiner, Lindsay Mitchell, Whale Oil, Catallaxy Files, Tactical Ninja, Thrutch, Noodle Food, TimG_Oz Blog, Mother of Exiles, RobynGn405, Mark Hubbard, Ann McElhinney, Cathy )


‘Dancer,’ study, by Degas


Look how ingeniously the master painter makes a whole figure with just a few lines in pastel and chalk on coloured paper.

[Hat tip Michael Newberry]

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Thursday, 6 December 2012

It was never about the temperature

Since the UN’s Framework Convention on Climate Change is meeting again preparatory to issuing another scare-mongering report explaining how we’re all going to die—meeting this time without the scientists because, really, it’s never been “all about the science” has it—it seems a good time to see how some of their earlier predictions have panned out.

The divergence between what has happened and what the UN’s scientists always said would happen is shown below.


The green line shows their projections if we’d carried on at 1990 levels of industry; the blue if we’d beefed things up a little, and the orange if we’d stopped altogether. In the end, we beefed things up a lot—an 8.5% rise in CO2 levels in the last fifteen years tells you just how much--and got back in return nothing like what the UN’s scientists models told us.

Which tells you how much you can rely on their models, which is the only place dangerous warming continues to happen.

You might disagree and say, oh no the sea is warming up radically as we speak, absorbing all the temperature rises we just know are about to hit us. Really?


And the warming we’re experiencing now is unprecedented! Are you sure?


And it’s on this basis that the United Nations’ luminaries propose we embark up on a massive and unprecedented transfer of wealth – of US $100 billion a year – from soon-to-be-formerly-rich Europeans and Americans to UN bureaucrats who claim to represent the world’s “developing” nations and Earth’s poorest citizens.

It was never about the temperature, was it.

PS: Here’s five so-called “charts of doom” that are anything but—a swift debunking of prominent warmist memes about the “unprecedented” melting of Greenland’s ice sheet (based on only a decade’s data); “America’s “worst drought in 50 years” (well, apart from the other ones back in 2000-2001, 1988, 1981, 1963, 1940, 1925, 1917 and 1910… but not nearly as bad as the protracted droughts of 1953-1956 and 1933-1936); coral reefs being doomed—doooomed, I tell you (despite the Great Barrier Reef, for one, enjoying a hockey stick-like uptick of its own in its ongoing calcification rate); wildfires multiplying uncontrollably across the States (largely due to land-use change, firefighting and arson, nothing to do with temperature; and civil wars now being on the rise—haven’t these people ever read a history book.


Dave Brubeck, 1920-2012


Musician Dave Brubeck died overnight one day shy of his 92nd birthday.

Brubeck made the cover of Time magazine back in 1954, preceding the huge popular success of his time-challenging biggest hit ‘Take 5,’ featuring Paul Desmond’s fluid saxophone lines over Brubeck’s riffing (stick that on the dance floor and watch your dancers get their feet tangled up), and his best-selling album Time Out. Touring with Duke Ellington at the time, his first move when he heard the news of his cover portrait was to walk along the corridor to apologise. Duke should have been first, he said later.

Jazz in the thirties and early forties was popular music. Not so by the fifties and sixties however, but Brubeck’s music still broke through. Time Out—the title a pun on the difficult time signatures he invited his band to wrestle with on the album—became the second-biggest selling jazz record in history, topped only by Mile Davis’ classic Kind of Blue. It didn’t hurt that it featured both ‘Take 5’  and ‘Blue Rondo a la Turk’—a neat riff in 9/8 time he picked up from a street muso in Istanbul and transformed into something of wonder.

One Brubeck story from which I drew inspiration myself related to a surfing injury to his neck he suffered as a young man,* making it virtually impossible for him to continue playing the piano as he had done. Resolving not to give up his dream, instead of playing the keys solo by rolling off melodic lines (requiring much more keyboard focus) he changed to playing in block chords and directing the band. Turns out it did his career no harm at all, and changed the way jazz piano was played.

My own favourite Brubeck album is his collaboration with a singing Louis Armstrong, The Real Ambassadors, (from which come ‘Summer Song’ and ‘They Say I Look Like God,’ a piece Dave thought Louis would have fun with but in which instead he pulled out every piece of pathos he could. (Brubeck himself talks about it movingly on this Armstrong documentary.) It seems a fitting tribute today to a man with a life well-lived.

* “Brubeck's career was just getting rolling when disaster struck in 1951. While working a gig in Hawaii, Dave had a swimming accident and nearly broke his neck. ‘I was swimming with my kids on Waikiki Beach and my last famous words were, 'Watch Daddy,'’ Brubeck recalled. ‘And I dove into a wave and there was a sandbar right in front of me. And rather than hit it with my face, I turned my head and it almost broke my neck, and I thought I was gonna be paralyzed. I had to go to the Army hospital and stayed there for twenty-one days in traction and they were able to pull my neck back.’ While lying in traction at a local hospital, he lost his job and his trio.

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Thomas Sowell’s Fiscal ‘Cliff Notes’

The always very quotable Thomas Sowell has some things to say about the follies of fiscal cliffs—and the real problem the “cliff” conceals.

Amid all the political and media hoopla about the "fiscal cliff" crisis, there are a few facts that are worth noting.
    First of all, despite all the melodrama about raising taxes on "the rich," even if that is done it will scarcely make a dent in the government's financial problems. Raising the tax rates on everybody in the top two percent will not get enough additional tax revenue to run the government for 10 days.
    And what will the government do to pay for the other 355 days in the year?

Taxing the rich is all about politics. It has nothing to do with economics. It’s the politics of envy—rolled out by Obama in this depression the same way Franklin Roosevelt rolled out his abuse of “economic royalists” in his.

All the political angst and moral melodrama about getting "the rich" to pay "their fair share" is part of a big charade… Taxing "the rich" will produce a drop in the bucket when compared to the staggering and unprecedented deficits of the Obama administration.
    No previous administration in the entire history of the nation ever finished the year with a trillion dollar deficit. The Obama administration has done so every single year. Yet political and media discussions of the financial crisis have been focused overwhelmingly on how to get more tax revenue to pay for past and future spending.

This is the real problem the phony problem is being used to conceal.

The very catchwords and phrases used by the Obama administration betray how phony this all is. For example, "We are just asking the rich to pay a little more."
    This is an insult to our intelligence. The government doesn't "ask" anybody to pay anything. It orders you to pay the taxes they impose and you can go to prison if you don't.

As we know, much of the money being over-spent has been shovelled out for decades by the entitlement state. In the name of “need, not greed.”  Much of what has been wasted in this last decade was shovelled out in the name of “stimulus,” or "investing in the industries of the future"—“all the fancy substitute words for plain old spending.”

The theory about "stimulus" is that government spending will stimulate private businesses and financial institutions to put more of their money into the economy, speeding up the recovery. But the fact that you call something a "stimulus" does not make it a stimulus.
Stimulus spending began during the Bush administration and has continued full blast during the Obama administration. But the end result is that both businesses and financial institutions have had record amounts of their own money sitting idle. The rate of circulation of money slowed down. All this is the opposite of stimulus.
What about "investing in the industries of the future"? Does the White House come equipped with a crystal ball? Calling government spending "investment" does not make it investment any more than calling spending "stimulus" makes it stimulate anything.
What in the world would lead anyone to think that politicians have some magic way of knowing what the industries of the future are? Thus far the Obama administration has repeatedly "invested" in the bankruptcies of the present, such as Solyndra.
Using lofty words to obscure tawdry realities extends beyond the White House. Referring to the Federal Reserve System's creation of hundreds of billions of new dollars out of thin air as "quantitative easing" makes it seem as if this is some soothing and esoteric process, rather than amounting essentially to nothing more than printing more money.
Debasing the value of money by creating more of it is nothing new or esoteric. Irresponsible governments have done this, not just for centuries, but for thousands of years.
It is a way to take people's wealth from them without having to openly raise taxes.

Hello, Russel Norman?


Decks the halls with macro follies

Yes, it’s nearly Christmas.  But that doesn’t mean you need to deck your halls with economic stupidity.

Brought to you by the good folk who brought you the Keynes v Hayek rap, here’s the latest from EconStories:

Deck the Halls with Macro Follies
Each year, our attention turns to the holidays… and to holiday consumer spending! We’re told repeatedly that, because consumer spending is 70 percent of measured GDP, such spending is vital to economic growth and job creation. This must mean that savings, the opposite of consumption, is bad for growth. But is it? Can we really consume our way to prosperity, or does savings and investment come drive economic growth?

This explanation might help you enjoy the jokes:

Each year, our attention turns to the holidays… and to holiday consumer spending! We’re told repeatedly that, because consumer spending is 70 percent of measured GDP, such spending is vital to economic growth and job creation. This must mean that savings, the opposite of consumption, is bad for growth.
    This view of macroeconomics was first popularly asserted by Thomas Malthus in 1820, nearly 200 years ago. Malthus believed recessions where caused by “underconsumption” because there was a “general glut” of goods unsold. To recover from a recession and grow, we needed to stop all the saving and spend more to buy up all the goods on store shelves. Savers are like the miserly Ebenezer Scrooge. If you want a happy holiday, you’ve got to clear those shelves and give people a reason to produce more and create jobs. Or so Malthus thought.
    John Maynard Keynes resurrected this approach and built on it with his influential “General Theory”, which now underpins much of our government policy and public discussion of spending and economic growth. Keynesians believe aggregate spending drives the economy and savings is a “leak” out of the flow of spending. Indeed, this economic philosophy underpins many people’s widespread obsession with retail sales each holiday season. Keynesian Macro Santa’s sack is filled with spending.
    But there is another view on recessions, recoveries and growth.
    Classical and Austrian economists such as Adam Smith, Jean-Baptiste Say and Friedrich Hayek viewed savings as the vital lifeblood of economic growth and production as the means by which we live better and consume more in the long term. Our savings aren’t simply taken out of the economic system, but become the source of capital that entrepreneurs use to create new goods and increase productivity. These economists believe this increased productivity is the key to a wealthier world. Before we consume, we must effectively produce what others value — at prices that cover the costs. This fundamental idea, that our demand for goods is enabled and constituted by our supply of other goods came to be known as the “Law of Markets” and later “Say’s Law”.  For classical and Austrian economics, recessions happen when producers make mistakes. They create goods that can’t be sold at a profit. These malinvestments tend to cluster in a recession as a result of systematic problems, such as disruptions in the financial system and often government interventions in the economy.
    Recovery and growth in the classical and Austrian view is driven by restructuring production so that entrepreneurs discover again the best — i.e. the most valuable and sustainable — ways to serve customers. That process is lead by new entrepreneurs and driven by savers who make capital available to fund new investments and new ventures. Sustainable saving and investment means creating more value for others while using fewer resources. This process lies at the core of healthy economic growth, including better job opportunities and a rising standard of living. If there are problems in the financial system such that our savings aren’t effectively being invested but sitting idle in bank vaults, or people are hoarding cash under their mattress in distress, a classical approach seeks to get the root of that problem and resolve the monetary problems with monetary solutions such as increasing the money supply to meet demand and other approaches. Using up more real resources through additional consumption in such a case is a applying the wrong medicine to the disease.
    Consuming is our end goal, but producing value must be the means to that end. That is to say, Macro Santa’s sack is filled with saving.

So which approach do you think is right? We favor the Smith-Say-Hayek approach to economic growth. Share your thoughts!

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Art show opening tomorrow night!

Railway St

Artists Jasmine Kamante and Jesper Sundwall, who I feature here regularly, mostly because they’re so damn good, emailed to tell me:

“We will both have works in Artstation's Professional Practice End of Year Group Show.
Please join us at the opening next Friday December 7th from 5.30pm to 8pm at Railway Street Studios, 8 Railway Street, Newmarket.”

See you there tomorrow!

PS: The show runs until January 16th, Mon to Sat, 10am to 2pm.

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Wednesday, 5 December 2012

Watch out, there are warmist police about

[Hat tip Paul L.]

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Who’s having a worse day than you?

Well, probably Brendan Horan for one.

And these nineteen people.

[Hat tip Gene Callahan]

There are much bigger threats than the “fiscal cliff” [corrected]

In 35 days the US Government goes off the so-called “Fiscal Cliff”—tax cuts expire, spending cuts kick in, the debt ceiling is broken, and all hell is (allegedly) loosed on the world.


Marc Faber says no. There are much bigger problems out there, including the enthusiasm of politicians and investors to continue faking reality.

Peter Schiff also says no. There are two much bigger threats to the US economy than the immediate “fiscal cliff,” he says: debt, and Ben Bernanke.

The biggest risk is not that “we go over this phony fiscal cliff,” Schiff said in a recent interview. “It’s [that] the government cancels the spending cuts, cancels the tax hikes,… [and] instead we end up going over the real fiscal cliff further down the road.”
“In fact,” he added, “the real fiscal cliff comes when our creditors want their money back and we don’t have it.”

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The Homogenization of the Car

If you want to know why the world’s cars are so bland, boring and identically dull, look no further than the regulations cluttering up the world’s biggest car market—the U.S.—where all the world’s car stylists now go to die.

The Homogenization of the Car
by Jeffrey Tucker

imageThe antique car, specially ordered for the occasion, was waiting for the bride and groom to take them to the party after the wedding. I was among the guests who were more enraptured by the car than by the main event. Absolutely stunning.

It was a Studebaker. At best I can tell, it was a 1940 Commander convertible. I had to look it up: This company was born in 1852 and died in 1967, and produced some of the most visually gorgeous cars in its day. It even made an electric car in 1902! Wartime controls shrunk its margins and led to an industry consolidation that killed the company.  On this Saturday afternoon, this car was still fabulous, after all these years. We stood in a parking lot packed with new models. No one cared about them. We were all obsessing about this old Studebaker. It is rightly named: It commands attention. The shape makes it a work of art. The hood looks like nothing made today. The red leather interior is luxurious.

We stood there in total admiration. We wondered about the gas mileage. It can’t be more than today’s gigantic “light trucks,” but we all agreed that paying more to drive something that cool would be worth it.

Yet it’s not a choice. No manufacturer anywhere in the world can make a car like this anymore. Step back from the situation and think about it. In the 1930s, phones were awful, and you were lucky to have one at all. No one today would give up a smartphone for one of those old things. Same with shoes, computers, televisions, ovens, and so much more. No one wants to go back.

With cars, it’s a different matter. Our sense of nostalgia is growing, not receding. But we don’t even have the choice to go back. There will be no more pretty cars. The US government and its tens of thousands of micromanaging regulations on motor vehicles will not allow it.

The day before the wedding, I was at the grocery store and saw another amazing car, this one a tiny sports model with roll bars. It just took my breath away, and I’m not even much of a car person. I usually don’t care what I drive. But this one was just too great not to elicit a sense of awe.

I asked the owner where he bought it, what model, what make, etc. This car challenged my impression that all new cars look the same. He said that he built it in his garage. He got the kit from Factory Five Racing.

“You have to build your own car in a garage because no maker is able to sell something like that?”

“You got it.”

These car kits are a way of “breaking bad” in an era of total government control of the physical world. They are a workaround. The law permits hobbyists and antique collectors and used car owners to drive these pretty cars around. But it doesn’t allow carmakers to sell road-legal cars that look just like these.

The old expression goes “If you want something done right, you have to do it yourself.” There’s only one problem: It should not be true in a developed economy. We should be able to take advantage of the division of labor. We shouldn’t have to build our own cars any more than we should have to weave our own clothes. But that is exactly where the regulations have taken us.

Did you ever wonder how car companies can make stunningly great cars that they call “concept cars,” but these cars are somehow never available to you and me? I’ve always been puzzled about this. I figured it was just because the concept cars were too expensive to make. That’s not it. It’s that the regs don’t allow them to exist as retail items.

It hasn’t happened all at once. It’s been a bit at a time, taking place over four decades in the name of safety and the environment. The whole thing began in 1966 with creation of the National Highway Traffic Safety Administration, followed by the Environmental Protection Agency and dozens of others. Every regulator wanted a piece of the car.

Each new regulation seems like it makes sense in some way. Who doesn’t want to be safer and who doesn’t want to save gas?

But these mandates are imposed without any real sense of the cost and benefits, and they come about without a thought as to what they do to the design of a car. And once the regs appear on the books, they never go away. They are stickier than code on a patented piece of software.

Now the endgame has arrived. Try as they might, manufacturers have a terrible time distinguishing their cars from each other’s. Car homogenization has become something of an Internet meme. It turns out that all new cars more or less look alike. I had begun to notice this over the last 12 months and I thought I was just imagining things. But people playing with Photoshop have found that you can mix and match car grills and make a BMW look just like a Kia and a Hyundai look just like a Honda. It’s all one car.

Truly, this cries out for explanation. So I was happy to see a video made by CNET that gives five reasons: mandates for big fronts to protect pedestrians, mandates that require low tops for fuel economy, a big rear to balance out the big fronts, tiny windows resulting from safety regulations that end up actually making the car less safe, and high belt lines due to the other regs. In other words, hysterical concern for safety and the environment has wrecked the entire car aesthetic.

Never mind that safety and the environment create contradictory results. The more gas you save, the lighter the car and the more likely it is to kill you in a crash. Corporate average fuel economy (CAFE) regs have certainly killed many people. Similarly, the more safe it is, the more gas it uses, as a general principle. Meanwhile, the gas itself is being ruined with corn additives that shorten the life of the engine.

These regulations are responsible for the disappearance of the station wagon and the domination of the car market by huge vehicles that can be classified as trucks, which are regulated according to a different standard. That’s right: Regulations designed to encourage fuel economy have done exactly the opposite by pushing people out of cars and into SUVs — which just so happens to be exactly what the big three manufacturers want. It is not surprising that the most consistent voices against CAFE standards have come from abroad, not from Detroit.

No one set out to wreck the diversity, functioning, and beauty of our cars. But that is precisely what has happened, as the political and bureaucratic elites have asserted their own value systems over the values of both producers and consumers. They are the masters and we are the slaves, and we are to accept our lot in life.

Consider the point about pedestrians. How many lives has a high front end really saved? No one knows. But the regulation itself seems to rule out the possibility that drivers and pedestrians can work out problems for themselves, without regulatory intervention. In other words, we are being treated like children. Wait, not even that. We are being treated as if we have no brains at all.

The situation is very serious. Some 30 years ago, futurists imagined that cars of the future would be stunning and beautiful and would bring total joy to driving. Consider, for example, this E-Type Jaguar below, arguably the most beautiful car ever made, killed overnight by US safety regulations.* Or the Triumph TR7 that was once said to be the “car of the future.” That future has been entirely wrecked.

imageRegulators made it the car of the past, a dashed dream that had to die to make way for the weird, homogenized stuff we are permitted to buy today.

Americans used to take pride in our cars and laugh at the horrible cars produced under socialism in, for example, East Germany. The Trabant will go down in history as one of the worst cars ever. But as we look back at it, at least you could see out the windows and at least the plan seemed to put the interests of the actual driver above Mother Nature and the non-drivers. The socialist central planners had a bit more sense than the American regulators.

In the end, if the goal is to protect the peds and the Earth, you can do no better than mass transit and the bicycle. We all know that this is what they are after. Last year, the Obama administration announced new fuel economy standards to be obeyed by 2025 that no gas-alone car in existence can comply with. These standards will vastly raise the price of the car and force into existence a world in which cars are all electric or plug-in hybrids. (Read the gory details here.)

Everyone rightly condemns bailouts and cronyism that sustain unsustainable industries. But here is the truth. If the corporate fat cats in the car industry and the unions that dominate them didn’t have political pull, the abolition of the car would probably be an already accomplished fate. As it is, the car is allowed. But it is not allowed to develop, not allowed to take a shape that consumers would like, and not allowed to function like an actual economic good.

The car was the foundation of the second industrial revolution. Encroaching government is robbing it of its future. We once dreamed of a flying car. The regulators are putting us in the position of just dreaming about returning to the glory days of the 1970s. That’s just pathetic.

Jeffrey Tucker

Jeffrey Tucker is the publisher and executive editor of Laissez-Faire Books, the Primus inter pares of the Laissez Faire Club, and the author of Bourbon for Breakfast: Living Outside the Statist Quo and It's a Jetsons World: Private Miracles and Public Crimes, among thousands of articles. Click to sign up for his free daily letter. Email | Facebook | Twitter

* US safety regulations introduced in 1974 meant cars needed to be able to drive head-on into brick walls without sustaining a prescribed amount of damage. Jaguar engineers argued their car was designed to drive around brick walls, not into them. The argument cut no mustard, the E-Type was withdrawn from sale, and the XJS hurriedly introduced.


Liberalism: Reclaiming the Term

The republication of Ludwig Von Mises book Liberalism gives us the opportunity to reflect on the theft of a word. This guest post by Louis M. Spadaro, a student of Von Mises, comes from the foreword of an earlier edition...

Liberalism: Reclaiming the Term
by Louis M. Spadaro

imageThe original work, published in 1927 in German, was entitled Liberalismus and so complemented, as indicated earlier, Mises's book on socialism. That it was deemed desirable or necessary, when the English translation was prepared in the early '60s, to re-title it The Free and Prosperous Commonwealth illustrates pointedly what I believe to be a real tragedy in intellectual history: the transfer of the term liberalism.

The underlying issue is not merely terminological; nor can it be brushed aside as just another instance of the more general degeneration of language — an entropy of words, so to say — in which earlier distinctions of meaning and tonality have tended to be lost. There is more here than a devaluation of terms, important as that may be; involved are substantive matters of the greatest practical as well as intellectual significance.

To begin with, the word liberal has clear and pertinent etymological roots grounded in the ideal of individual liberty. It also has a valuable historical foundation in tradition and experience, as well as the patrimony of a rich and extensive literature in social philosophy, political thought, belles lettres, and elsewhere. For these and many other reasons, it is inconceivable that the point of view which this book illustrates should not have exclusive and unassailable claim on the liberal label.

Yet, for all of this, the term liberalism proved unable to go beyond the 19th century or the Atlantic without changing its meaning — and not just slightly but virtually to that of its contrary! The resulting confusions and imprecision are such that one finds it hard to conceive of a deliberate plan that could have succeeded more in obfuscating its content and meaning.

The sadness of all this is compounded by at least two more considerations. One is the astonishing agreeableness with which the titular heirs of liberalism not only let the title slip away but actually repelled it by their willingness to use it as a term of opprobrium for crypto-socialists, for whom a more relevant label already existed. In comparison to this spectacle, the ancient fable of the camel and the tent looks like a mild case of rezoning. The other reason for regret is that the loss of the term liberal made it necessary to have recourse to any number of contrived surrogate terms or tortured circumlocutions. (E.g., "libertarian," "19th-century liberalism," or "classical" liberalism. Is there, incidentally, a "neo-classical" liberalism to which anyone claims memberships?)

Is the liberal label by now irreversibly lost to us? In an appendix to the original German edition (and included in the translation), Mises discusses the changing meaning of the term and alludes to the possibility of recapturing it. But by 1962, in his preface to the English translation, he appears to have abandoned any hope of doing so.

I must respectfully disagree. Because, by any reasonable standard, liberalism belongs to us, I believe we are bound to try to take it back — as a matter of principle, if for no other reason. And there are other reasons. For one thing, inasmuch as liberalism, as Mises points out, includes more than economic freedom, it is really needed as the most suitable and inclusive term. For another, the need to communicate clearly and unambiguously with the general public — whose support is ultimately essential — we need a single, straightforward term and not some verbal contrivance that must sound "mealy-mouthed" to the man in the street. Furthermore, the present time and circumstances are relatively propitious — a growing general disenchantment with government interventions and the reviving awareness of individual freedom of choice can identify more readily with a respected and comprehensive name.

How can we proceed to reclaim our own name? Most probably by simply reversing the process by which we have been losing it; first by ceasing, ourselves, using it in its incorrect meaning; then by insistently reinforcing its correct use (the term has not completely passed over in some parts of the world); and finally by refusing as often as is necessary to go along with its continued occupancy by those with less than no legitimate claim to it — they should be urged to seek a label that fits their views as well as liberalism does ours.

Mises, Ludwig von

Some will fret unduly about the inevitable confusion of doctrines — I suspect this concern was partly responsible for our earlier unseemly haste in vacating the tent — but this is a price we should be ready to pay this time. For one thing, some confusion still exists as matters stand now, so that a bit more, temporarily, is not intolerable. Also, confusion cuts both ways, so others will share the cost and this time, perhaps, the discomfort will cause the camel to withdraw.

Thus it is that the present reprint reverts to the original title of the book. It is to be hoped that others will concur in using the term without apology or qualification — it needs none — so that liberalism may ultimately resume its traditional and correct meaning.

Louis M. Spadaro (October 11, 1913 – May 3, 2008) was a friend and colleague of Ludwig von Mises, under whom he earned his PhD in economics. President of the Institute for Humane Studies and the founding dean of the Fordham University Graduate School of Business Administration, he taught economics at Fordham University since 1938. He was the author of the textbook Economics: An Introductory View (1969) and the editor of New Directions in Austrian Economics.
This post appeared previously at the Mises Daily.


‘Such Sweet Thunder’ by Duke Ellington

In 1957, Duke Ellington was inspired by the works of William Shakespeare to write a suite of songs based on the bard, Such Sweet Thunder. This was the radio premiere, broadcast from the concert at Ravinia Park Festival, July 1, 1957.

0:00 Such Sweet Thunder
1:48 Sonnet For Sister Kate [solo: Quentin Jackson]
4:53 Up And Down. Up And Down [solo: Clark Terry]
8:04 Star-Crossed Lovers [solo: Johnny Hodges]
12:38 Madness In Great Ones [solo: Cat Anderson]
16:25 Half The Fun [solo: Johnny Hodges]
20:42 Circle Of Fourths [solo: Paul Gonsalves]
23:23 Jam With Sam [solos: Willie Cook, Paul Gonsalves, Britt Woodman, Russell Procope, Cat Anderson]


Tuesday, 4 December 2012

Cop that, caucus

Former Labour Party MP John Tamihere says he will say what he thinks despite concerns from his party colleagues.

Should he ever find himself short of an epithet, Cactus Kate has boiled up all his favourites for him and distributed them around his future caucus to see how they fit.

Which, for the most part, is quite well.


Goldilocks and the failed Ginga [updated]

All around the world failed banks have been bailed out by taxpayers to the tune of billions and billions (and billions)of dollars.

In New Zealand and Australia, mercifully so far in this ongoing crisis, this hasn’t happened.  (Not yet, but don’t bet against it.) Instead, Australasia’s trading banks are showing healthy profits—profits in line with the return on capital enjoyed by other Australasian businesses—profits earned on lending that has paid off, rather than failed.  Profits that have made savers and the banks’ shareholders richer.

Only to the likes of the Greens’s Russel Norman is this a problem, the Ginger Whinger sniffing at this small mercy: telling State Radio this morning that even in this time of global economic uncertainty banks should make neither big profits nor small profits, but profits that are only “average.”

This is the same man who recently declared he wanted to print enough money to make bankers richer and wage-earners poorer.

The man who wants the finance portfolio in the next government.

Here’s Tim Minchin.

UPDATE: Russel Norman says Australian banks excessive profits are “strip mining” New Zealand.  David Tripe (who heads Massey University's Centre for Banking Studies) says New Zealand banks make a PRE-tax return on total assets of just over 1%, and a post-tax return of 0.6% - which he describes as "certainly not outrageously high either historically or internationally.”

Not exactly “strip mining,” is it Russel.

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High fibre

Yet another flagship National government project is going down the toilet, and you are going to made to pick up the slack.

There is huge demand for high-speed fibre broadband, said the government in its election platform, such demand that only a government fibre network can satisfy it.

Yet when the government price-fixer in chief, the Communist Commission, declares it intends to cut the price that Telecom Chorus can charge customers on its existing copper network by one dollar a month, a panicky Prime Minister declareS he’s ready to legislate to make sure that wouldn’t happen!

Prime Minister John Key says the decision could … prove problematic for the ultra-fast broadband network because consumers could be discouraged from switching from copper to fibre.

If one dollar a month is enough to prove so “problematic” for his pet project, so problematic the PM wants to price-fix the price fixers, this might suggest to you just how sound an “investment” he thinks his pet project really is.

[Hat tip Gavin B.]


Bain compo

Like it or not—and many of us don’t—but David Bain was found not guilty of murder in his long-delayed retrial.

Not guilty. Not innocent, no, because courts can’t determine that, but not guilty. That was the jury’s verdict: not guilty of murder.

And imperfect as it is, the court system we have is still the best we have to determine guilt in criminal cases—and the jury on the case heard far more of the evidence than we did, who had to rely on a headline-hunting media for our soundbites.

So given his years in prison, given the verdict, given what seems to be the verdict of an independent judge brought over from Canada to assess the evidence on a civil standard of proof—which seems to be that David Bain is “innocent on the balance of probabilities” and therefore deserves compensation from the justice system for the system having failed him—why then shouldn’t he get it?

That’s what justice would be, wouldn’t it?


Can’t remember

When a Prime Minister’s memory and grasp of affairs disappears, isn’t it time to turn him in?

Sure, like a befuddled oldster he has a long history of losing his memory. Unlike every other adult in the country at the time, he couldn’t remember where he was during the Springbok tour.  When he was promising “significant” tax cuts during the 2008 election, forgetting there’d just been a global financial crash, he couldn’t remember that his former employer Merrill Lynch—where he’d earned his fortune—had been swept away in the destructive tide.

He couldn’t remember when he first heard about Kim Dotcom; couldn’t remember a briefing about raiding his house, a cafeteria visit, or cracking a joke about it at the time; who he talked to, or not, about Sky City’s casino application; who he talked to, or not, about Mediaworks’ taxpayer bailout; who he talked to, or not, about how he voted on  the drinking age.

And this week, at the moment, he’s saying  he “can’t remember” the name of the senior American official who flew into Wellington last week in a liveried US government plane, or even if  he’d seen a piece of paper with the name on it.

Can’t remember.

It’s like a little child lying about things he’d rather his mother not know, and hoping she doesn’t notice. But it’s still lying—and if it’s not lying, then it’s incompetence.

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More beneficiaries’ babies

Astonishing news this morning that the world’s highest-paid beneficiaries just keep pumping out the babies, despite a history of scandal and abuse and abundant evidence that the offspring never stop snivelling at the trough.

Yes, turns out  the royal family are pumping out another sprog.

Just another mouth for the taxpayer to feed.


Monday, 3 December 2012

Sweet Chariot v the haka

Funny, when there’s 50,000 Poms singing over it, the All Blacks’ haka looks like nothing more than twenty-two white blokes slapping themselves and dancing arhythmically. At least from this view we’re blessedly spared the facial grimaces. 

The bloody thing’s well past whatever use-by date it ever had.

Maybe instead of offering a determined opposition an ideal opportunity to wind up over-sensitive souls by “disrespecting” the stupid thing, the All Blacks should stop the overhyped non-dance, and concentrate instead on playing their sport right to the end of the season.

[Hat tip Stan B.]


The politics of nude jogging [updated]

If you like to run around the house naked, that’s your business. If you like to run naked through shopping malls, however, then that’s the business of lots of other people—especially the owners and shop-owners of the shopping mall.

When you’re running naked through “public property” however—that is, when there’s no real owner to make decisions on standards of behaviour thereon—we all appear to face a conundrum.  Should it be allowed? At what hours? And if not, why not?

Nude jogger Andrew Pointon gets his kicks jogging nude around the McLaren Falls Park outside Tauranga. A public park. A government-owned park. So who gets to set the rules when there’s no real owner?

Andrew just survived an eighteen-month court ordeal in which Justice Paul Heath finally found Pointon not guilty in the High Court of offensive behaviour for this nude traverse of the Crown’s domain.

Pointon said Justice Heath ruled fairly regarding the nude jog.
"It's not offensive behaviour when you go out in the middle of the country to begin a run naked,'' Pointon said… "
It is a win for all libertarians…”
Mr Pointon's lawyer Michael Bott - a specialist in human rights and civil liberties – said…if the original decision had gone unchallenged, it would have had a "chilling effect" on freedom of expression.

I don’t agree.

Mr Bott has confused running with speaking.

It’s perfectly true that folk don’t have a right not be offended. It’s also equally true that folk shouldn’t be required to provide a microphone or a platform to those they disagree with—which is what happens when we all “own” a public place and Mr Pointon wants to run through it with his tackle all exposed. The issue of public ownership only serves to confuse an issue already confounded by widespread misunderstanding of what free expression really means.

That Pointon’s lawyer talks about the issue being about “expression” means he’s not just confused himself, but strongly suggests Pointon’s nudity itself is less about a private pleasure and more to do with shocking others. Expression, after all, has to be expressed to someone.

And even from the safety of private property, common law rightly prohibited broadcasting behaviour further afield that would diminish a neighbour’s own peaceful enjoyment of their property—especially if it were intended to cause offence. Thus for example, setting up a stage on your church-going neighbour’s boundary on which you intended a nude performance of the Nativity Scene would be prohibited, without their consent. Whereas taking a piss against a boundary tree would not.

Mr Pointon appears to have forgotten basic principles of neighbourliness. Not to mention courtesy.

UPDATE: Yes, people, “offense” is contextual. Which is why common law works it out so well. Also why Jimmy Carr gets away with the world’s most offensive jokes.  Or does he.

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Stories from the Black Book of Communism

Warning: Contains graphic stories and images of man’s inhumanity to man.

[Hat tip Trevor Loudon]


Oh look, we’re sixth! [updated]

Looks like the NOT PC blog ranks as the sixth most read political blog in the country—very pleasing, I’ll admit, but still an order of magnitude behind the top two political blogs, and trailing a telly blog, a transport blog, a craft blog, a science blog and a blog about imaginary friends.

The top ten NZ political blogs for November were, according to the Open Parachute Blog Rankings:

                         Blog                                        Visits in Nov.     Page views in Nov.

    1. Whale Oil Beef Hooked     457,843                   836,775
    2. Kiwiblog                                 376,821                    661,814
    3. The Standard                        192,579                   445,870
    4. The Dim-Post                          62,106                     87,209
    5. NewZeal                                    59,011                      74,620
    6. Not PC                                        34,605                     46,356
    7. No Right Turn                         32,568                     41,621
    8. No Minister                              22,409                    28,526
    9. Keeping stock                          22,130                    30,011
    10. Imperator Fish                       20,016                    31,805

UPDATEMartyn Bradbury has bestowed a bizarre collection of blogging awards for 2012, in which I’m flattered not be included.  And in an almost entirely unrelated  exercise, telly-blogger Regan Cunliffe has started a blog where you can watch paint dry.

The Myth of Austerity, by Philip Bagus

Guest post by Philip Bagus

Many politicians and commentators such as Paul Krugman claim that Europe's problem is austerity, i.e., there is insufficient government spending.
    The common argument goes like this: Due to a reduction of government spending, there is insufficient demand in the economy, leading to unemployment. The unemployment makes things even worse as aggregate demand falls even more, causing a fall in government revenues and an increase in government deficits.
    European governments pressured by Germany (which did not learn from the supposedly fateful policies of Chancellor Heinrich Brüning) then reduce government spending even further, lowering demand by laying off public employees and cutting back on government transfers. This reduces demand even more in a never ending downward spiral of misery.
    What can be done to break out of the spiral? The answer given by commentators is simply to end austerity, and boost government spending and aggregate demand. Paul Krugman even argues in favor for a preparation against an alien invasion, which would induce government to spend more. So the story goes.
    But is it true?
    First of all, is there really austerity in the Eurozone? One would think that a person is austere when she saves, i.e., if she spends less than she earns. Well, there exists not one country in the Eurozone that is austere. They all spend more than they receive in revenues.
    In fact, government deficits are extremely high, at unsustainable levels, as can been seen in the following chart that portrays government deficits in percentage of GDP. Note that the figures for 2012 are what governments wish for…

imageEuro government deficits as a percentage of GDP

The absolute figures of government deficits in billion euros are even more impressive:

imageEuro government deficits in billions of euros

A good picture of "austerity" is also to compare government expenditures and revenues (relation of public expenditures and revenues in percentage):

imageEuro government spending above revenue, as a percentage

Imagine that a person you know spends 12 percent more in 2008 than her income, spends 31 percent more than her income the next year, spends 25 percent more than her income in 2010, and 26 percent more than her income in 2011. Would you regard this person as austere? And would you regard this behaviour as sustainable? Yet this is precisely what the Spanish government has done. It shows itself incapable of changing this course. Perversely, this "austerity" is then made responsible for a shrinking Spanish economy and high unemployment.
    Unfortunately however, austerity is the necessary condition for recovery in Spain, the Eurozone, and elsewhere. The reduction of government spending makes real resources available for the private sector that formerly had been absorbed by the state. Reducing government spending makes profitable new private investment projects and saves old ones from bankruptcy.
    Take the following example. Tom wants to open a restaurant. He makes the following calculations. He estimates the restaurant's revenues at $10,000 per month. The expected costs are the following: $4,000 for rent; $1,000 for utilities; $2,000 for food; and $4,000 for wages. With expected revenues of $10,000 and costs of $11,000 Tom will not start his business.
    Let's now assume that the government is more austere, i.e., it reduces government spending. Let's assume that the government closes a consumer-protection agency and sells the agency's building on the market. As a consequence, there is a tendency for housing prices and rents to fall. The same is true for wages. The laid-off bureaucrats search for new jobs, exerting downward pressure on wage rates. Further, the agency does not consume utilities anymore, leading toward a tendency of cheaper utilities. Tom may now rent space for his restaurant in the former agency for $3,000 as rents are coming down. His expected utility bill falls to $500, and hiring some of the former bureaucrats as dish washers and waiters reduces his wage expenditures to $3,000. Now with expected revenue at $10,000 and costs at $8,500 the expected profits amounts to $1,500 and Tom can start his business.
    As the government has reduced spending it can even reduce tax rates, which may increase Tom's after-tax profits. Thanks to austerity the government could also reduce its deficit. The money formerly used to finance the government deficit can now be lent to Tom for an initial investment to make the former agency's rooms suitable for a restaurant. Indeed, one of the main problems in countries such as Spain these days is that the real savings of the people are soaked up and channeled to the government via the banking system. Loans are practically unavailable for private companies, because banks use their funds to buy government bonds in order to finance the public deficit.
    In the end, the question amounts to the following: Who shall determine what is produced and how? The government that uses resources for its own purposes (such as a "consumer-protection" agency, welfare programs, or wars), or entrepreneurs in a competitive process and as agents of consumers, trying to satisfy consumer wants with ever better and cheaper products (like Tom, who uses part of the resources formerly used in the government agency for his restaurant).
    If you think the second option is better, austerity is the way to go. More austerity and less government spending mean fewer resources for the public sector (fewer "agencies") and more resources for the private sector, which uses them to satisfy consumer wants (more restaurants). Austerity is the solution to the problems in Europe and in the United States, as it fosters sustainable growth and reduces government deficits.

Lower GDP?
     But does austerity not at least temporarily reduce GDP and lead to a downward spiral of economic activity?
    Unfortunately, GDP is a quite misleading figure.* GDP is defined as the market value of all final goods and services produced in a country in a given period, yet this is not at all what it measures.
    There are two minor reasons why a lower GDP may not always be a bad sign.
    The first reason relates to the treatment of government expenditures. Let us imagine a government bureaucrat who licenses businesses. When he denies a license for an investment project that never comes into being, how much wealth is destroyed? Is it the expected revenues of the project or its expected profits? What if the bureaucrat has unknowingly prevented an innovation that could save the economy billions of dollars per year? It is hard to say how much wealth destruction is caused by the bureaucrat. We could just arbitrarily take his salary of $50,000 per year and subtract it from private production. GDP would be lower.
    Now hold your breath. In practice, the opposite is done. Government expenditures count positively in GDP. In our example, the wealth-destroying activity of the bureaucrat raises GDP by $50,000. This implies that if the government licensing agency is closed and the bureaucrat is laid off, then the immediate effect of this austerity is a fall in GDP by $50,000.
    Yet as we should understand, this fall in GDP is a good sign for private production and the satisfaction of consumer wants.
Bagus, Philipp    Second, if the structure of production is distorted after an artificial boom, the subsequent restructuring necessarily entails a temporary fall in GDP. Indeed, one could only maintain GDP if production remained unchanged. If Spain or the United States had continued to use their boom structure of production, they would have continued to build the amount of housing they did in 2007. The restructuring requires a shrinking of the housing sector, i.e., a reduced use of factors of production in this sector. Factors of production must be transferred to those sectors where they are most urgently demanded by consumers. The restructuring is not instantaneous but organized by entrepreneurs in a competitive process that is burdensome and takes time.
    In this transition period, when jobs are destroyed in the overblown sectors, GDP tends to fall. This fall in GDP is just a sign that the necessary restructuring is underway. The alternative would be to produce the amount of housing of 2007. If GDP did not fall sharply, it would mean that the wealth-destroying boom was continuing as it did in the years 2005–2007.

    Public austerity is a necessary condition for private flourishing and a rapid recovery. The problem of Europe (and of the United States) [and New Zealand] is not too much but too little austerity — or rather its complete absence.
A fall of GDP can be an indicator that the necessary and healthy restructuring of the economy is underway.

Philipp Bagus is an associate professor at Universidad Rey Juan Carlos. He is an associate scholar of the Ludwig von Mises Institute and was awarded the 2011 O.P. Alford III Prize in Libertarian Scholarship. He is the author of The Tragedy of the Euro and coauthor of Deep Freeze: Iceland's Economic Collapse. The Tragedy of the Euro has so far been translated and published in German, Slovak, Polish, Italian, Romanian, Finnish, Spanish, Portuguese, British English, Dutch, and Bulgarian.
See his
This article first appeared at the
Mises Daily.

* GDP is a completely misleading figure. The metric of GDP, so-called Gross Domestic Production, would be more accurately titled Nett Domestic Consumption—since it measures all consumption spending, including every dollar spent by the governmet, yet only a small percentage of spending undertaken on production.  “In that light, the desire to boost debt-based consumption via the creation of artificial demand seems much more questionable.” See Mark Skousen: “Consumer Spending Drives the Economy?