Internet Commentator

"Buy our product, we're monopsony purchasers!"

I am baffled at the current campaign for Ribena blackcurrant drink which proclaims that "95% of Irish Blackcurrants are in Ribena". At first I thought this was just sloppy copywriting and they meant that 95% of Ribena's blackcurrants were sourced in Ireland. But, apparently it is true, the Irish Blackcurrant industry is almost entirely captured by a quasi-monopsony. I am not so foolish as to overrate the economic competence of the Irish blackcurrant drink consumer but, all the same, it does seem like a curious selling point. Is it such a great thing that this entire industry is beholden to Glaxo Smithkline, producers of Ribena? I mean, this is the sort of thing you regularly hear people complaining about when supermarket chains "squeeze" suppliers. Even if they are appealing to protectionism, surely a moment's calculation would evince that the purchasing decisions of the Irish market - tiny when compared to the global market - would have little bearing on the viability of the Ribena brand. If the rest of the world suddenly acquired a distaste for this drink, Ireland's blackcurrant growers would be royally screwed.

Curiously, the same quasi-monopsony also applies in Britain.

Price discrimination

I've been trying to figure out the rationale for this puzzling price discrimination: I noticed the other day in Tesco that for my preferred range of kitchen towels, Bounty, the best value pack (at about €2.01 per 100 sheets) was the smallest, two roll pack. Researching it a bit further I notice that the "Bounty Fat" brand which promises "50% more sheets", charges quite a bit more than 50% for this privilege (about €2.26 per 100 sheets). Now, the facile explanation is that people are stupid enough to be dazzled by that "50% extra" splash and ignore the price hike but I find it hard to believe that people would be reliably and consistently stupid enough for this strategy to be stable. Is it really possible that the convenience of changing the roll 33% less frequently is worth that 12.5% premium?

Go Nuts!

Got an unkempt garden, perhaps your nails need doing, or maybe you want to add comments to your blog but would prefer someone else took care of troll patrol? Avowed "commie" Back Seat Driver Diana gets in touch with her inner capitalist with a modest proposal: a recruitment agency which (literally) promises poor immigrants peanuts (and the odd scrap) to come and work in Ireland:

So, lads, here is the crunch, do you endorse my ‘non-protectionist but caring deeply for immigrants’ best interests walnuts and scraps paying scheme’? Naturally I will have to come up with a catchier name when recruiting abroad, so far I have thought of: ‘The answer to your problems in a nutshell: come work in Ireland!’ and ‘You don’t want this job? You’re nuts!’ but I am open to suggestions.

Choices

Which do you favour?

A. An indisputably good outcome which appears to confound your pet theory or

B. An indisputably bad outcome which appears to validate it.

The optimal choice is surely A - it demonstrates that your theory either needs refining or junking and there is also the benefit of that "good outcome". Yet is is striking to consider how many people take greater comfort in B and either dread the day that A comes to pass or somehow manage to explain it away. The theory ought to be only of instrumental value - that is, its utility rests on its ability to produce good outcomes. It doesn't have any intrinsic value which must be defended against the bad outcomes which question it.

The "pet theory" of the organisation mentioned below is anti-capitalism. This requires them to spurn any poverty-reducing policies which resemble globalised capitalism and embrace several proven bad ideas - autarky, mercantilism, dirigiste planning - all the better that the theory remain validated. This is highly irresponsible and I suggest immoral. Rich countries can afford the inefficiencies associated with bloated public services and protectionism - it is a misnomer to say that rich countries "benefit" from protectionist trade policies, free trade is good for producers in poor countries and consumers in rich countries - but poor countries need dynamic economies to generate wealth and growth. While others see might see such campaigners as altruistic idealists, I see this as a form of neo-colonialism, attempting to install in the developing world a western-derived collectivist socialism which has been spurned across the developed world

Make Poverty History?

I must say I'm rather disappointed to see a big banner slashed across my cousin-in-law's blog advertising the Make Poverty History campaign.

My first impression was to be somewhat sceptical of such an overreaching aim. One might think that it is good to overshoot, but the problem of the perfect being the enemy of the good besets such campaigns. It is as realistic to talk about making poverty history as it is of making death history. There will always be poverty, the problem is the nature of that poverty. Poverty in the "developed world", despite what some charities would prefer you to believe, is of a different order to that in the "developing world". Changing the nature of poverty, or bettering the lives of the poor is a worthwhile goal. Eradicating poverty altogether is a millenialist goal, a chimera and there's very good reason to believe that pursuit of the latter will be at the expense of the former.

A cursory inspection of the site did nothing to negate my initial assessment. I see that this campaign has three main planks, 1. Trade Justice, 2. Drop the Dept and 3. More and better aid.

Now, I am in favour of "Trade Justice" if it means liberalisation of trade and removal of the quotas, tariffs and subsidies that combine to shut out imports from poorer countries. Unfortunately what the anti-globalisation ideologues at makepovertyhistory.org have in mind is a recipe for continuing and deepening poverty:

Between them, they're forcing poor countries to open up their markets to foreign imports and businesses, and sell off public services like electricity - even when this isn't in their interest. They're also banning poor countries from supporting vulnerable farmers and industries, while wealthy nations continue to support their own.

According to their creed, autarky is good and state management and ownership of public services is always good, as are subsidies to keep failing businesses going (thus crowding out potentially profitable competing enterprises). These are tried, tested and failed policy prescriptions rebranded for a new, gullible generation. Adherence to this ideology prevents such organisations from recognising practical remedies that are likely to have a real benefit to the "developing world".

As for "dropping the debt" and "more and better aid", the efficacy of such prescriptions is highly sensitive to the nature of the country's government which will be the main beneficiary of the aid or debt writeoff. A kleptocratic regime will simply conform to type and squirrel away such aid. A ruinously spendthrift government will continue in the fashion to which it has become accustomed. The problem of moral hazard even attaches to those regimes which are more responsible.

The best use of foreign aid is in responding to crises and dealing with health pandemics. But, the only sustainable way for poor countries to become richer is through economic development and trade. Economic development is simply impossible in the absence of stability, some measure of personal freedom and defensible title to property and such countries cannot trade freely while arrays of protectionist barriers remain.

You want to make the nature of poverty in the developing world history? Better to have the aims of 1. Property rights, 2. Drop the Tarrifs, 3. More and better action against HIV and Malaria.

Bono Double-Think

Conor alerts me to a good catch by Johan Norberg:

Bono, U2’s lead singer, is one of the leaders of the campaign to supply the third world with drugs by dismantling the intellectual property rights of pharmaceutical companies. So is this his position on IPRs generally? Not at all. Bono is also one of the leaders of the campaign to strengthen the IPRs of (you’ve guessed it) musicians. Today, most European countries protect copyrights on sound recordings for no more than 50 years. The U2 members think that they should be allowed to "retain their copyright for at least as long as they live, and to pass it to their heirs, just like any other asset that they own." Yes, it’s very easy to say that property if theft when you’re talking about other people’s properties.

Someone might say that there is a big difference between music and life-saving drugs. I agree. Gifted musicians would probably continue to create music even if they didn’t make much money on it. But I don’t think that anyone would continue to pour hundreds of millions of dollars into research for new drugs if they had no way of financing that investment through sales.

ASI V2.0

The widely read and influential Adam Smith Institute website is undergoing a major upgrade and is seeking donations to assist with the cost. If you want to help spread the great Scottish economist's ideas about free markets and free societies, details are here.

Comparative Advantage

Tyler Cowen reports from Mexico on hit movie "Un Dia sin Mexicanos", a comedy which imagines all of California's Latinos disappearing overnight leaving the "Gringos" to fend for themselves:

There are few movies that accurately illustrate market economics and fewer yet that show a good understanding of the theory of comparative advantage. This is one of them, and it can be viewed as a truly libertarian film. I won't offer any spoilers but the final message is cosmopolitan and explores the question of what it really means to be a Latino. Plus it offers rich insight into how the Mexicans feel they are viewed by Americans. The film does hit a few false notes and has some slow patches but much of it is quite hilarious.

A few days ago, Tyler Cowen's fellow Marginal Revolutionary Alex Tabarrok adopted a curiously coy tone in commenting on self described scientific racists Richard Lynn and Tatu Vanhanen, authors of the widely discredited book "IQ and the Wealth of Nations". Gene Expression blogger "Godless Capitalist" gleefully seized upon this as some kind of endorsement of his "race realist" theory, one of the corrollaries of which is to argue that the US should impose an immigration moratorium and expel all illegal immigrants. Perhaps he might now reassess the extent to which his position is shared by the Marginal Revolution blog.

Zero Sum Thinking and Intrinsicism

Discussions in the thread below with Enda touched on redistributionist taxation. One of the difficulties in demonstrating the pitfalls of redistributionism - high taxes lead to low growth and fewer jobs, destroying wealth resulting in an increase in poverty and unemployment and achieving the exact opposite effect to that intended - is a philosophy, I previously identified, of elevating intention over outcome. Thus: it doesn't matter that taxing the rich to give to the poor doesn't make the poor better off, "at least" goes the refrain: "they tried". But another difficulty lies in the resilience of zero sum thinking. It is strongly intuitive that wealth is a fixed amount which may never be created or destroyed but simply apportioned. My guess is that we have evolved to think in a zero sum way. If Ugh kills a mammoth there is X amount of mammoth . If Urk steals some of that mammoth, there is less to go around.

There are, of course, many other areas where zero sum thinking hinders appreciation and another is the issue of free trade. In a great article, Colby Cosh provides a simple explanation, for non-economists, of what is wrong with intrinsicism:

Still, zero-sum logic is terribly compelling to some minds: Every leftist heresy from pre-Marxian socialism through environmentalism is arguably founded on it. I believe it to be based on a certain kind of narcissistic projection. Consider: This column I'm writing is not worth as much to me in cash as it is to the National Post, so the paper takes it and sends me a cheque. I spend the money; the Post uses the article. Everybody wins. But what if I were convinced that there was some very high intrinsic, or essential, cash value to my words -- that, say, every column I wrote was, perhaps in God's or Marx's or Gaia's eyes, "really" worth $10,000?

Why, I would regard the necessity to sell it for much less as an injustice, and my whole working life as a barrage of such injustices. I'd be screaming "Unfair! Unfair!" and my screams would join the infinite, unrelenting chorus directed at that ghastly predator, The Market.

I bring this up because the Democrats finally pushed me over the cliff of comprehensive irritability on Wednesday night. During her address to the party's national convention in Boston, I heard the Canadian-born Governor of Michigan, Jennifer Granholm, start off saying "We want trade with other countries ... lots of it," and then pause, condescendingly, as if any adult in the United States could not have anticipated the kicker: "But we want it to be fair trade."

That's trendy baby talk for economic planning: "fair trade" equals centrally planned trade. The Democrats want to forbid international exchanges they dislike, particularly ones that let people in cash-hungry places demand a lower price from American companies for their labour. They perceive a patent unfairness when some unionized American factory worker whose wages have grown obese is suddenly underbid by a foreigner. The American, after all, was getting what the job was "really" worth.

It's the same intrinsicism in a different guise. The "fair" wage, which exists only in the mind of the politician, is postulated to actually exist somewhere out there in the world of forms. But it certainly doesn't exist in the mind of the Third World worker trying to compete with it.

Farewell to economic liberalism?

I must concur with Chris. It doesn't augur well for our future prosperity that Ireland's most economically liberal Finance minister can get effectively sacked for being "too right wing". It may well be the case that Charlie McCreevey's move to Brussels will be seen as the beginning of the end of a period of unparalleled prosperity and growth. Economic liberalism doesn't begin and end with one man but it is hard to ever see someone as liberal as he appointed to this job again. It is often the case that people don't know, as the saying goes, what is good for them. I wouldn't be surprised if, in the future, after a period of prosperity-wrecking Green posturing, Labour spending, FF or FG incompetence or SF muddle, people look back fondly on the McCreevey era.