Tuesday, March 06, 2018

Tariffs: Trump's economic experiment

When my brothers and I were quite young, we heard that rhubarb leaves are poisonous.  We had rhubarb growing in our back yard, so on more than one occasion (usually when friends were over) we would each take a bite out of a rhubarb leaf to test whether it really would poison us.  Apparently this is well below the dose required for toxicity, and none of us noticed any effects.  (Perhaps some readers are now saying "Aha, that explains him!")

President Trump is engaging in a very interesting economic experiment.  It's sometimes said one cannot conduct economic experiments on a nationwide or worldwide level, but of course it is academic economists saying this about themselves, not about the president.  We are about to witness a grand experiment.  Tariffs are  poison, and Trump is about to prescribe a big dose.  OK, alleged to be poison, by us oddballs called economists.  Let's see who's right.

I've not yet read the details of the tariffs, other than that steel and aluminum will be particularly targeted, but apparently retaliations are already being considered elsewhere.  An economic experiment is about to get underway, and the results will be instructive. 

I will make some predictions.  The overall prediction -- the main experiment -- is that trade war will inflict real economic harm on America and Americans.  Some specifics:

1. There will be a series of tit-for-tat responses, in which tariffs will increase and trade war intensifies.  This isn't a forgone conclusion, and I think it's the weakest of my predictions.  Conceivably targeted nations could drop some of the trade restrictions and practices that Trump claims justify his tariffs.  I don't expect this, but it is certainly possible that trade war won't ensue, that the threat of U.S. tariffs will cause trade partners to increase their openness American exports. 

As Adam Smith put it in Wealth of Nations, "To judge whether such retaliations are likely to produce such an effect, does not, perhaps, belong so much to the science of a legislator, whose deliberations ought to be governed by general principles which are always the same, as to the skill of that insidious and crafty animal, vulgarly called a statesman or politician, whose councils are directed by the momentary fluctuations of affairs."  Trump claims expertise at the art of the deal; we'll see how insidious and crafty an animal we really have in Mr. Trump.

2. This will cause consumer prices to rise substantially in the United States, especially for lower end consumer goods, e.g. the sorts of things one buys at Walmart.  I'm reminded that Robert Reich lamented that low consumer prices at Walmart meant a lower standard of living for the bottom half.  I think that showed Reich to be an utter ignoramous, but now we'll have a test of his claim.

3. I expect capital inflows into the U.S. to plummet.  Somehow Trump supposes that foreign investment into the United States is good, and trade deficits bad.  Apparently Trump, his pseudo-economic advisor Peter Navarro, and all the other people who think this could make sense are unaware that there is no way to have net foreign investment in a country unless it runs a trade deficit.  The simplest balance of payments accounting shows this.  It's not a theory, it's basic accounting.

4. If net foreign capital inflow declines, I expect interest rates in the U.S. to rise. The national debt is already growing out of control; when the federal government must refinance its burgeoning debt at higher interest rates, this growth will accelerate.  Trump is playing with fire.  The debt problem is about to get much worse.

There are really three predictions here for economic harm in the United States: higher prices and lower living standards, lower investment and hence future productivity, and an acceleration of the national debt and risk of sovereign debt crisis.  I can make other observations of a more political nature.  Given DPRK's behavior, this seems an especially dumb time to hit South Korea with damaging tariffs.  Trade war has the potential to undo the economic gain from tax cuts and deregulation that was undercutting the chances of the Democrats to take over Congress.  (Memo to Trump: The dems are your enemies.  They will impeach you and destroy you if they ever get the chance.)  And I'm skeptical this tariff policy is really driven by "unfair" foreign practices.  I think it is pure mercantilist rent-seeking by the U.S. steel industry. 

This is not a good situation; it's a terrible one.  But enemies of economics  -- our enemies on both the left and the right -- have been yammering for far too long about how free trade is just dogma, that protectionism creates jobs and prosperity, that economists know nothing. Oh yeah?  Well I say (and 95% of economists say) that protectionism is poison.  So on with it, let's have a little empirical testing.

Monday, March 05, 2018

A Problem With Anarcho-capitalism

It's spring break at [redacted]* and I've returned to reading things not directly work related, mostly newer stuff on Austrian economics.  It's only a short step from that to recent writings on anarcho-capitalism (AC).  Ugh.  What surprises me about AC writing is how little it deals with political reality. 

I would suppose that, having laid out the basic ideas, anarchists would next explain 1) how their utopian system actually might be brought about, and 2) how it would deal with some obvious real-world challenges.  Perhaps such writing exists, but I haven't seen it.  Instead, AC writing mostly seems to be the Nirvana fallacy, invective directed against non-believers, equivocation, and kicking up dust to confuse the issues.  I used to take anarcho-capitalism seriously, and even considered myself an anarcho-capitalist (although not a very good one because I also liked the minimal state idea and wasn't so sure an anarcho-capitalist society could defend itself against a USSR or a Nazi Germany), but increasingly I think that most adherents are just espousing a religious faith, and a rather silly one at that.  There's no point in considering it a viable system if adherents can't come up with reasonable answers to questions and objections.  Here's an example.

How will we get to an anarcho-capitalist system?

This seems a crucial question.  If someone tells me "I have the perfect system, but there's no way to make it actually come about," I'm inclined to think they do not have the perfect system, or even a better system.  A better system will actually solve real world problems, and to do that, it must be attainable.  I'm uninterested in performance on the blackboard.

Anarcho-capitalists such as Murray Rothbard describe how their system would work in an ideal world.  Rothbard proposes that private protection agencies (PPAs) would sell defensive services such as protection of life, liberty, and property, or contract enforcement, or legal proceedings, etc. in the free market.  And since private enterprise in the free market works better than government for provision of the usual goods and services, it would similarly excel here.  I dispute this, but let's grant Rothbard's argument.  The proper response is "so what?"  So far as I know, no one has ever explained how we could transition to this allegedly superior system. 

Let's put some teeth in this criticism.  What is the anarcho-capitalist solution for South Korea?  Suppose everyone in RoK reads Rothbard, sees the anarcho-capitalist light, and agrees the state should be abolished.  Should they do it?  Vote in a national referendum to immediately disband the state, including the military?  And watch as DPRK troops pour across the undefended border?

Perhaps that's not a fair question.  Instead of voting to abolish the state, everyone in RoK instead agrees that all state branches will be auctioned off among themselves.  Buyers of defensive agencies like the police, military and courts, can then start enrolling subscribers, and competing agencies can spring up as well.  I suppose Kim Jong un shouldn't be allowed to bid, and the authorities will have to screen for straw buyers, but otherwise this should work well, no? 

Well, probably not.  A South Korean entrepreneur contemplating buying the RoK Army, say, would be faced with the problem of figuring out how to collect payments for defensive services.  S/he'd also be faced with staffing problems, since RoK currently has universal conscription for males.  Let's assume there could be solutions (I have no idea what), but they'd be costly and time consuming to set up.  The same goes for police, courts, and law.  In the interim, Kim Jong un, miffed that he was blocked from bidding, invades.  And remember, I'm assuming everyone in South Korea has converted to Rothbardianism, so by assumption we rule out that bidders would use the army or police for nefarious purposes, like robbing their fellow citizens, or that the high bidder would simply turn and sell all the military hardware abroad and retire in the Bahamas.

Again, maybe this isn't fair either.  Maybe anarcho-capitalism would just arise, "spontaneously," on the market, and eventually displace the state.  Well, if AC is so superior, why doesn't it do this?

And there's my real point.  If anarcho-capitalism really is superior to state systems, why don't these AC systems spring up "spontaneously," either overnight or gradually.  Because the state won't let them?  So far as I can tell, anarcho-capitalists believe that a society that adopts anarcho-capitalism would be able to fend off attacks by states, and that it would be superior in this regard than if it had a state organizing a national defense.  Yet we don't see anarcho-capitalist systems emerging anywhere.

Perhaps there's an "infant industry" argument so it would be too much to expect AC to emerge where there are established and well-functioning states (although I think that would be an admission that anarcho-capitalism really doesn't work), but then why not in places where there's no state to speak of at all -- e.g. Somalia, Afghanistan, or Syria?  Or some isolated tropical island, like the Republic of Minerva?

The whole AC theory seems mostly a religious faith, held regardless of empirical evidence or logic, mere "assurance of things hoped for, conviction of things not seen."  A utopian political theory is a weird thing in which to place one's faith.
* We've never bothered to follow our "new policy" before, and aren't about to start doing it now!

Friday, February 23, 2018

I'm against you! Memo from a proud owner of an AR-15...

Memo to the young survivors of the Florida high school murder rampage who are now calling for gun control.  Your victimhood does not give you wisdom, insight, or authority.  I am against gun control, and since one of you have framed it this way and you accept it by your silence, I'm against you.

Progressives have adopted the notion that victimhood gives one special status.  As progressives see it, victims need "to be given voice," that is, we are to listen uncritically to whatever they say.  I reject that.  No one should suspend their critical faculties, for any one or any reason, ever.  We should always ask, of any statement, "is it true?"  Statements from victims of wrongdoing are no exception.  In this specific case, the fact that a repellent murderous thug, who should long ago have been hunted down and removed from society, failed at murdering some people, does not suddenly bestow on them special understanding of what my rights should be, nor how to prevent similar murder attempts in the future, nor anything else.

Unfortunately, modern progressives have adopted this nonsense.  I oppose all forms of progressivism, but it's hard to imagine older progressives, e.g. Teddy Roosevelt or Woodrow Wilson or Franklin Roosevelt, espousing this nonsense.  Modern progressives have allied themselves with the New Left.  The New Left -- the Frankfurt School and other post-modernists -- confronted with the "problem" that capitalism actually makes everyone better off, had to find new grounds to justify the revolution. Hence the focus on racism, sexism, fascism, cisnormalism, able-ism, patriarchy-ism, etcism.  Since the "proletariat" is actually liberated and uplifted by capitalism, the New Left needed new grounds for revolution, and new categories for victims.  This is all a strategy for the New Left.  It's revealed religion for progressives.

The late historian and progressive Tony Judt argued that the one thing progressivism still has to offer is fear.  He was right.  Progressivism is a losing philosophy -- it is intellectually bankrupt.  It claims to be able to push us towards utopia, but we've seen progressive policies fail, one after another...New Deal, Great Society, Obamacare are obvious examples, but there are many others.  It's little wonder that those with a penchant for progressivism move towards the left.  The alternative would be admitting one was wrong and abandoning progressivism. Both the New Left and progressivism now promote emotion over reason.  Hence the imaginary authority victimhood bestows on one, in leftist eyes.

It's bunk.

If readers thought this post might delve into details of AR-15s and gun control, that's already been covered here.  See this and this.  If you want a quick version of my opinion, read the words of Mike Vanderboegh above.
Note: For those who can't be bothered to read carefully, the memo is specifically to advocates of gun control, not to victims in general.  And it is about their advocacy of terrible policies, not their status as victims.  I always am sympathetic to victims of crime, all of them.  Sympathy for their victimhood is not the same as bestowing authority on those who espouse bad ideas.

I realize this is hard to understand for muddleheads who suppose emotions should trump all else... but try to follow the distinction.

Tuesday, January 30, 2018

SOTU .. it's about time!

Finally!  A State of the Union address that didn't outrage, annoy, or otherwise irritate me.  Better yet, it was, in fact, good.  I liked the celebration of tax cuts and the no-more-appeasement message concerning North Korea and Iran, and the no mercy for Daesh.  I don't agree on the "first pillar" of immigration reform (the 12 year path to citizenship for 1.8 million) but Trump's point that no one will get all they want and that he's laid out a reasonable compromise made sense.  Expect Democrats to be outraged.  And I hope it galled Barack Obama  to hear Trump celebrate repeal of the Obamacare mandate and that he's keeping Guantanamo Prison open for enemy combatants.

But what I really liked is that Trump did not hector his opposition; he didn't scold the Supreme Court or any faction of Congress, he didn't lecture any group of American citizens (say, gun owners and the NRA) on how they must change.  He celebrated America and freedom, and opened by saying he wants to make America great for all Americans.

Just words, of course... but words matter.  It's hard to imagine President H.R. Clinton saying such things, mostly because she's never said them in the past.

President Trump spoke to everyone.  I think we are very lucky he's president.

Memo to Paul Ryan & co.

As the staff of Unforeseen Contingencies awaits the State of the Union address, "we" note there's a dispute concerning "guests" at the SOTU.  Some of the Democrats are bringing illegal aliens as "guests," and Rep Paul Gosar (R, AZ) is asking that the police arrest them as they go through security and their illegal status becomes evident.  This makes obvious sense; Congress should not tolerate wanton, flagrant flouting of the law.  Of course, some who don't care about the law, Paul Ryan and Jeff Flake, for example, disagree. 

Question for those two gentlemen: when is it appropriate to permit criminal violations?  Is it just when your political opponents are trying to mock and humiliate the President of the United States, or do you have additional situations in mind where your personal fiat should trump the law. 

"We" at Unforeseen Contingencies do disagree in one small detail with Rep. Gosar; "we" think the Capitol Police should also arrest Congressmen, Congresswomen, and Congressthings who facilitate this law-breaking.

Sunday, January 21, 2018

The Blessings of Multiculturalism in Sweden

John Pepple suggests we put multiculturalism to the test in Sweden.  He suggests Sweden be used as the example to show what happens with massive muslim immigration into a Western country, using Sweden as a sacrificial lamb.  In fact, this appears to be happening.  Here's a report from U.K.'s Daily Mail detailing the growth of immigrant gangs armed with military weapons, increasing crime, no-go zones, and the usual denial from the "progressive" elite.  Read it, it's chilling.  But things have reached the point that Prime Minister Löfven is now contemplating use of the Swedish army as a last resort for imposing law and order.  (Note that this Reuters report carefully avoids mentioning who comprise the gangs.) 

Here are a few excerpts.  From Katie Hopkins' Daily Mail piece:

I asked Mattias Karlsson, leader of the Swedish Democrats - currently leading in the polls - why other politicians refuse to acknowledge the problems right in front of their eyes.

He explained that to accept there is a problem would mean accepting nearly 80 years of liberal thinking was wrong. That multiculturalism doesn't work, that mass immigration does not lead to integration, that Sweden has made a big mistake.

And from the Reuter's piece:

“People are shot to death in pizza restaurants, people are killed by hand grenades they find on the street,” Sweden Democrat leader Jimmie Akesson said in parliament on Wednesday.

“This is the new Sweden; the new, exciting dynamic, multicultural paradise that so many here in this assembly ... have fought to create for so many years,” he said sarcastically.

I can't imagine anything will actually be done.  Don't expect the army.  Current European governments are tied to (or by) political correctness and the dogma of multiculturalism.  It would take entirely different governments to make any serious change in policy. 

Pepple's lamb continues its march to slaughter.

Saturday, January 20, 2018

Musical Interlude

Because you just can't get enough of North Korean girl rock groups doing instrumentals celebrating a nuclear attack on the United States, with snowmen on the stage, one in a Santa hat, for an audience of what appears to be middle-aged Party functionaries and some girls in traditional Korean dress.

Morabong Band performing Without a Break:

Wednesday, January 10, 2018

The War on Windchill

Unforeseen Contingencies makes a foray into applied science! I don’t know about other countries, but in the United States and Canada, weather reporting in winter includes “windchill,” always discussed in dramatic and dire terms, and usually explained with “feels like.” It’s become so prevalent and so out of hand that frequently people tell me the temperature, but in fact are reporting windchill, which is not the temperature at all. And asked what “windchill” means, they mumble some vague nonsense about the wind making it colder. This is a sad state of affairs, and “we” at Unforeseen Contingencies will do our part to correct it.

What is windchill?
When I was a child, growing up in Great Falls, Montana, windchill was never mentioned in weather reports, even though Great Falls is notoriously windy.  (On those rare moments when the wind stops, people look startled and say "what's that?!")  When windchill first started being included occasionally, probably around the time I entered college, reports were careful to explain what it really meant. If an unheated object is warmer than its surrounding environment, it loses heat, by convection, until its temperature equals that of the environment. Because the object is transferring heat to the air around it, it’s surrounded by a layer of slightly warmer air, which slows the continued convection. If there’s wind, this layer of air is thinner, that is, it’s blown away, and the object loses heat faster. Windchill is meant to be a measure and predictor of how windspeed accelerates the heat loss.

Windchill was initially developed by scientists, prior to World War II, for military reasons, I think, and was calculated by examining how long it took a bulb of water starting at some temperature to freeze, given various air temperatures and windspeeds. Note that this has everything to do with physical rate of heat loss for an inanimate object. It has nothing to do with perception, “feels like,” or “wind making things colder.” Perhaps it’s useful information for someone planning on spending extended time out of doors, but it gives no important knowledge one wouldn’t have with just temperature and a wind reading.

Why reporting of windchill is bunk.
Windchill is reported as “feels like,” “perceived,” “makes it colder,” and similar nonsense. Windchill is a measure rate of heat loss, for an exposed, motionless, bulb of water, in the original calculations. Don a windproof garment – on yourself, or on the bulb of water, and the windchill changes. Walk against the wind, it changes again. Start running, and it changes again. Turn around, and run with the wind, and it changes yet again; if you time your running speed correctly, there’ll be no windchill at all. Run along on an exposed ridgeline and you’ll get the full force of the wind, and the windchill will depend on whether it’s a headwind, crosswind, or tailwind. But stay behind rows of trees or buildings, or in a protected draw, and you’ll be out of the wind, and the windchill – except for the accelerated heat loss you create by not staying in one place. I have a great difficulty accepting a measure of weather that changes depending on what clothes I wear, what direction I go, how fast, and in what terrain. It’s not a measure of weather at all.

But even stupider is “feels like,” etc. Let’s say, for example, the temperature is 30F with a 50mph. The National Weather Service (U.S.) online calculator rates this a windchill of 18F. I guarantee that (30F, 50mph) feels nothing like (18F, 0mph); I’ve experienced both on more than one occasion. They are very different, they don’t feel even vaguely similar, and I would not dress the same for them. Even goofier is the idea that “the wind makes it colder.” At (40F, 50mph), the windchill equivalent is (25F, 0mph). (Yes, I’ve experienced both.) You can wait all day for your water bottle to freeze in the former, but it will never go below 40. This seems so obvious would I feel silly pointing it out – except that I hear people make this error on occasion. Would these people think, were it sufficiently windy, they could store their ice cream outside? (“Of course not, that would be impractical. Sufficiently strong winds would blow it away.”)

What’s the alternative?
A windchill calculation does not give us information that we don’t have from temperature and windspeed. In fact, it loses information. If one only knows the windchill is 18F, does that call for light insulation and a heavy windproof garment, or fairly good insulation and no windproof? For running, skiing, snowshoeing, hiking, and other outdoor activities, these are entirely different propositions, and a big deal. It’s much more useful to simply know the actual temperature and whether it’s windy or not. Since windchill will vary with your own direction and velocity, and wind typically blows in gusts and shifts direction, any number is hokum anyway.

And so…
“We” at Unforeseen Contingencies advise that anyone venturing into windy winter weather (i) carry effective windproof outer layer, to be donned as needed, (ii) wear appropriate insulating layer(s), (iii) adjust direction of travel as needed, and especially (iv) stop citing those ridiculous windchill numbers. Join us in our War on Windchill!

Photo: Chief blogger Charles N. Steele cross country skiing at minus 17F (minus 27C) near Great Falls, MT.  Frozen Missouri River in background.

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