Wednesday 28 December 2016

That Which is Seen and That Which is Not Seen

In economics we talk about the fallacy of the seen and the unseen. For example when you tax the population for a government make-work project you create jobs but as many or more jobs are being lost because the population doesn't have that money to spend in the shops. Well talk about a laboured analogy, but everyone posts about the stars who are dying, yet no one sees the stars that are being born!


RIP. George Michael and Carrie Fischer, et al.

Saturday 24 December 2016

Why The State will Not solve Social Problems

The impulse of the state is not to solve social problems but to create as many dependents as possible, including a bloated public sector full of Marxists and as many people as possible on welfare who they can then turn on whenever they need someone to blame for their own excesses. That is why the size of government grew massively even under so-called free market Thatcher who made hand-outs to big business and sent military spending through the roof. Every dependent will make justifications for the existence of the state as a necessary evil and attack the free market which takes people out of poverty. The natural state of everyone who is born is poverty; all wealth was created by individuals for themselves or to trade with other people for something which they agree upon in a voluntary exchange. Voluntary exchange enriches both parties as each trader values what they get from the trade more than what they part with, and so trade takes people out of poverty not government. Government retards this organic process by putting restrictions on who can trade with whom under what circumstances and passing an ever increasing litany of laws that make it impossible for poor people to find employment so that many people will have to compete for few jobs and accept whatever conditions are given to them. This creates dependency upon which government survives. To complete the trick the government directs the attention of the oppressed to their crappy bosses rather than the conditions which created the crappy bosses, those state interventions which restricted the number of jobs.

The government cannot solve social problems because the government lives on social problems. If tomorrow everyone woke up in a world without crime then what need for a large police force? In a world with little poverty and many routes out of poverty, then what need for huge welfare programs and government bureaucrats to administer them? If there wasn't a shortage of medical staff pushing the price of medical care through the roof then who would tolerate a million people on NHS waiting lists? If we didn't fear any enemies in the Middle East or Russia what need for a large military and curtailments on civil liberties? Who would need government without social problems? Who would want it? It is in the interests of government to perpetuate social problems internally and create enemies abroad, then blame all of this on capitalism and the free market so the average individual will call on government to save them.


If we want to solve social problems we need to dig in with our own hands and start helping. We can volunteer, create organisations, or support organisations that are already doing good work. 

Thursday 22 December 2016

A bunch of looters!

States are a cancerous growth on society. A bunch of looters. They enjoy the de jure privilege of not having to gather resources and property the way all other people and institutions do by request or by voluntary exchange. They bribe half the electorate to vote for them with free stuff and blackmail the other half with dependency and fear of starvation. 

They assimilate already existing institutions and make them worse. The NHS is an expression of the general will of the people to have universal healthcare. The state assimilates that and creates waiting lists a million lives long.

They supplanted organic institutions for providing welfare in the community and replaced them with a system that condemns generations to poverty.

Their moral and philosophical basis is so vacuous and without merit that they had to create a religion called democracy - the most prevalent religion, and least appraised for its virtues (or lack thereof as would more accurately be the case.) Their intellectual vassals coined bullshit theories like "the social contract" to post-fact rationalize their desire to run the lives of others by force, then disseminate them through an education system which teaches a false version of history designed to make people see bondage as freedom and freedom as slavery. More than ever, academics play the role that the churches played in the dark ages - they are apologists for state power. On one hand they claim individuals have moral obligations to government to which they did not consent, on the other they deny their right to their lives and the product of their labour by appealing to Hume's Law and post-modern doctrines which claim that no universal morality between men can exist. Universities tell people what they should learn and what to think rather than help them become fully fledged, skilled individuals with brilliant critical faculties, self-esteem, and strong ethics.

Once states are abolished people will look back on them the way we look back on slavery.



Wednesday 21 December 2016

Workplace Safety

It's widely believed that it was the intervention of government and labour unions which is responsible for improving safety conditions in factories and other industries, but that is not accurate. This graph demonstrates that workplace fatalities were already very much on the decline before OSHA (the Occupational Safety and Health Administration) was even founded in America:

Effect of OSHA work workplace fatalities:

Tom DiLorenzo wrote in Capitalism "Enriches the Working Class":
"Capitalism has also made the workplace safer. In relatively “dangerous,” strenuous, or dirty jobs, employers must pay a wage premium because relatively few people want such jobs. Economists call this a “compensating difference.” The man who rides on the outside of the garbage truck at daybreak, in the winter, in the northern states, does so because he makes a very good salary – better than any of his alternatives. Profit-seeking capitalists have always understood that they need to pay more to get people to perform risky or dangerous work. Therefore, they have also always understood that there is profit in making the work place safer. A safer workplace requires a lesser compensating difference. Lower wages paid to the workers can mean higher profits for the capitalist. Thus, the American workplace had become safer and safer for generations before the Occupational Safety and Health Administration (OSHA) was established in the 1970s. Indeed, OSHA has often reduced workplace safety with its clumsy and stupid workplace rules enforced by government bureaucrats with no knowledge of the specific work that they are regulating. "

The government can intervene to bring about workplace safety faster, but this will not be without any negative consequences to their employees. The dictates of government will displace private efforts. Once the state declares that they are in charge of safety businesspersons are going to leave it up to the experts. Rather than investigating what investments will improve safety most effectively, they will spend lots of money on whatever the central planners at OSHA dictate; and if these are harebrained ideas these resources will be misallocated and go completely to waste.

Do you really think those workplace safety advancements were paid for out of the factory owners pockets? Well they weren't. They were paid for out of the workers pockets. Employers have a certain amount to budget for labour and it makes zero difference to them whatsoever if that gets spent on wages, health and safety, health insurance, company cars or anything else the employees might want to receive as payment in kind. On a free market employees will tend to get roughly the package of spending on them that they want because if a workplace is too dangerous they can go somewhere across the road that pays them less and spends more on safety. As recent empirical evidence of this the economist Benjamin Powell actually went to factories in the poorest countries in the world and asked them if they would like better health and safety, shorter hours, and a long list other benefits; overwhelmingly they said yes to everything - who wouldn't? - Unless those benefits meant less pay. In which case they declined them all. This is why workplace safety was shoddy when people were poor, but improved as people got richer. When you're broke you'd rather your employer spent the money on your wage than health and safety. However, as your standard of living increases safety at work becomes more of a priority so your expectations on your employer go up. This would all arranged voluntarily even without legislation from government. In fact it was! If employers were responsible for injuries or deaths they may have been sued for damage in common law courts for having caused harm or loss.

The best defense of workers rights is having the largest choice of employers available as possible. All of the things which the left think will help workers reduces their number of options by making employing people profitable to less employers and therefore reducing the options of workers rather than increasing them. The consequence of having less jobs to go around is that low skilled workers have to accept whatever is going on whatever terms are offered to them, and often tolerate crappy bosses. On a free market, some people might have to tolerate a less well paid job in the short term, but if they have a bad boss or do not like the safety conditions at work they can easily walk into a job elsewhere because anyone can employ them. This is a system of spiritual advancement. A wise individual can choose the job that will teach them the most skills, then move to the next one, and onto the next, and keep on moving from job to job gathering skills until they can get a management position, start their own business, or become a staff trainer or consultant themselves. It affords the maximum opportunity for class mobility. Each well-intentioned socialist policy: the minimum wage, maximum regulations, workplace safety, - takes a big slice out of the pie of possible jobs available and reduces the prospects of the poor to become wealthy in the long term.

Monday 19 December 2016

Government is a Trojan Horse for Environmental Destruction

For all its faults one thing the Government does is protect the environment from profit-seeking corporations, right? Without government to stop them,corporations would just lay waste to the environment in pursuit of the bottom line. That's the popular view.

An investigation of history might yield some surprises.

There was a time where the courts ruled by common law and were held separately and above the government. When an industrialist polluted  a stream or the air in a way that caused physical or financial harm to his neighbors, the courts would force them to pay reparations and a penalty. This in itself did a pretty good job of deterring people from polluting,

Until the latter part of the nineteenth century this form of law, where the right of every individual were considered, was successful, it stated that if you caused harm or law to another person it was your duty to restore them to their original condition and compensate them. Then, as documented by Morton J. Horowitz in his two-volume treatise named The Transformation of American Law, the legal system began to change. Industrialists went to the government to have it changed.to a more collectivist philosophy where lawyers and law makers became increasingly concerned with what was termed “the common good."

"Under the individualist view the law should protect everyone's right to life, liberty and property – which includes the right not to have your body or property damaged by the pollution of others. The new legal system however argued that no individual or group of individuals should stand in the way of the economic progress of the entire community. Therefore a few victims of pollution should not interfere with economic development prospects that would benefit "The greater good.”" (Tom Dilorenzo)

The government came back and told the people that while the factories were polluting and there would be some victims the industry served 'the common good' and therefore people just had to accept the pollution as a fact of life 'in the greater interests of society as a whole' and all those high minded phrases the left have since appropriated. When you consider history you will see that it is government that made the way for industry inflicting damage on others.

Thursday 15 December 2016

A Plan for Liberty

In my last post I admitted that libertarians don't have any solid plans but then other libertarians ask how would liberty ever be achieved?

Here is my sexy program for the most painless transition to anarchutopia - or whatever you'd call it.
If I was in charge of the state how would I get rid of the state?  I am probably going to write on each of these points sooner or later and as I do I am going to come back and change each into a hyperlink so if you want to follow my plan you can bookmark this page.

Start by cut the most conspicuous contested programs.
+ Cut all corporate welfare and handouts to big businesses, to stop them fleeing abolish corporation tax. Revenue will be regained from increased job growth and income.
+ Foreign Aid is the least popular government program. Cut it off completely, and unilaterally extend free trade to all nations willing to participate, import their products even if they don't accept ours. Justify the policy by claiming (rightly) we can do more good by trade than aid. End all barriers, tariffs and subsidies on foreign goods offer free trade to all nations.
+ Legalise cannabis immediately and enact a phased end to the drug war. Release all minor drug offenders from prisons and reduce cost of prison itself.
+ Halt employment of/replacements in the civil service, offer voluntary redundancy to all Public Sector workers with 1 to 2 years pay.
+ End foreign interventions reallocate funds to replace anything necessary for a robust defence. Put a freeze on increases in military spending.
+ End TV licensing and privatise BBC.
+ Withdraw from NATO, a Cold War relic.
+ Institute a permanent minimum wage freeze and remove all regulations pertaining to conditions of employment. Create minimum wage exemptions for staff undergoing training at work. From the beginning of the act anyone employed can be employed and dismissed under any conditions to which they voluntarily contract.
+ Repeal laws insisting anyone producing their own energy must sell it to the grid, and remove any laws prohibiting people from harvesting rain water for domestic use &c.
+ Legalise prostitution

Second Wave
+ Begin earmarking all taxes for purpose. Allow people to opt out of paying education tax if their children are in private schools, healthcare tax no NHS, fire brigade tax.
+ End all restrictions on employment.
+ Privitise contract law, state retains criminal law for the time being.
+ Replace welfare state with a series of performance based grants to charities and third sector organisations working to reduce poverty and dependency. (Back - to - work schemes, etc.)
+ Sell off government assets to highest bidder.
+ Phase out all agricultural subsidies over ten years, offer part of the subsidy money to farmers from retraining.
+ De-couple university system from government. Phase out all government monies for tertiary education as private universities spring up to provide low cost education.
+ Start to decouple the monetary system from government. Abolish all and any laws restricting the use of alternative currencies. Allow anyone who wishes to to open a bank or credit union without government permission. Let people decide themselves which institutions they want to frequent.
+ Fully de-regulate private health care - allow third party bodies to examine doctors and offer certification.
+ Fully deregulate private education as above.
+ Make it legal to sell blood, organs and unborn children.

+ Reinstitute the right to bear arms
+ End all police searches and warrantless searches.
+ Reintroduce habeas corpus.
+ Begin the phased abolition of nuclear weapons.



Wednesday 14 December 2016

Free Market Equality

The free market - we are told - creates large disparities in income and inequality. But let’s look at the facts.

A few hundred years ago, the wealthy used to go around in carriages with 4 horses, everyone else walked. Nowadays the wealthy man may have a Lamborghini, or a Rolls Royce, but even so - most poor families still have a car. That is equality.

You can afford, if it takes your fancy, to have steak dinner every night. A few hundred years ago you would have had to have been a king to afford that. That’s equality.

The richest person in the world can’t get that much better a broadband connection than you can. He can’t get comfier shoes, or a bed, or a couch. That is equality.

Everyone – increasingly now even people in third world counties – has a phone. That is equality.
A rich person has a flush toilet. You have a flush toilet. A rich person has water coming out of his taps. You have water that comes out of your taps. A rich person has electricity. You have electricity. You can afford soap. You can eat fruit that is flown in from all over the world, in every season. The richest lord in the world a couple of hundred years ago couldn’t even dream of the luxury that people who are considered impoverished in 1st world countries live in.

99% of Americans living below the poverty line have electricity, water, flush-toilets and a refrigerator. 95% have a television. 88% a telephone, and 70% air conditioning - just like rich. That is equality.

Now, I hate the term market competition – because the market is not about competition. Competition simply arises naturally, wherever there is choice between more than one option - whether that is a product, a partner, spending time in the evening, which friend to go to lunch with, or which parking space to choose. That said, market competition – as that is the term which is commonly used for the phenomenon of different service providers trying to sell their products to the same customers who have limited time and resources in which to consume those products – creates an upward pressure on the quality of products, and a downward pressure on their price, because consumers want the best product at the best price in most cases.

That is why at first hardly anyone could afford a computer, and because those greedy rich bastards who were so exuberant and wasteful with their handfuls of money decided to pay for them anyway – instead of giving it to the poor – the companies that made them were able to fund research to make the kind of computer that you are reading this article on now affordable to you.

Monday 12 December 2016

That's not real Socialism!

We live in a mixed economy where the state is responsible for almost 50% of the spending in the economy in the UK, and 19% of the population is employed in the public sector. The state controls the money supply, sets the interest rates, and is responsible for regulating each and every facet of the economy from the provision of energy, to the conditions under which someone can employ another person. The state runs the schools, and a great deal of the hospitals. It decides when a road is to be built, and when we are to build a railway. It hands subsidies to tobacco farmers, then taxes the tobacco we smoke. It hands welfare to the wealthy in the form of contracts and preferential legislation, and to the poor in the form of entitlements, free services and food stamps
.
There is no part of the society left untouched by the machinations of the state – whether rightly or wrongly – and yet we are told again and again that this is capitalism. The free market at work.

What's more whatever goes right in the economy: the government is responsible for, whatever goes wrong in the economy: capitalism is to blame.

This line of reasoning (if we acquiesce to calling it one) is at its most flagrant when people on the far-left attempt, shamelessly, to redefine the nature of regimes which were heretofore ubiquitously considered and described as communist – The Soviet Union, China, Cuba – as not socialistic, but in fact examples of “state-capitalism.” The underlying message is clear: Whatever we don’t want is capitalism, and whatever we want do want is socialism. And so it necessarily follows that no socialistic regime can ever really be bad, because if is woefully inefficient, or it yields tremendous abuses, or the people starve, we simply redefine it as some form of capitalistic one. What is more the philosophical doctrine of socialism narrowly escapes condemnation like a slippery frog.

By this trick the socialistic ideology becomes an unfalsifiable doctrine which is immune to any rational discourse or examination. An idee fixe. Whenever it fails in reality, it is “not real socialism.” Equally is it immune to the puncturing incision of factual evidence such as the inconvenient truth that throughout history the nations that are the most free economically thrive, while the nations that are the least free economically flounder. Socialism is good qua definition and thus consequently can never be abandoned as a doctrinal goal in light of the facts.

"The More of the Economy they Socialise, The More they Complain:
Capitalism Isn't Working!"
- Nathan Fraser

Saturday 10 December 2016

Libertarians don't have any solid plans

Recently, after quizzing me on how x, y and z would be achieved without Government intervention, a socialist told me that "All of the libertarians politics is based on "if and but" no real solid plan."

I said I can see why it might look like that but it's not really accurate. On reflection maybe he's right.

People often ask how various services would be provided if not for government, and often the best answer I can provide sounds something along the lines of, "perhaps it would be done like this, or like that, but it just depends on what people want; these are just my suggestions, experts would probably come up with better ideas, those would get tried out, improved upon, and the best ideas would win out over time."

That's admittedly, not a very solid plan. But we are really  skeptical about people with "solid plans."

Because if you have a solid plan you basically think you are a genius and can run the whole society so long as your plan gets implemented. That you have better ideas than the entire combined intelligence of society working to test potential solutions on the small scale and through trial and error, rather than complete a priori calculation, allow the best ideas to be optimised and prevail. 

We actually believe that the community as a whole has far better methods for reaching good ideas than anyone with a "solid plan" can ever achieve. We see the progress of society as working like a sieve for good ideas, bad ideas get weeded out and good ideas get more widely adopted and rolled out and improved upon.

Solid plans, on the other hand, are very inflexible.

If you ask a Socialist, "what do you think the policy should be on x," they almost always have one, and they almost never have the same exact policy as one another. They have fervent debates over which policies should be implemented (for the whole society) under socialism, not stopping to consider how autocratic this all is.

We don't like to impose our "solid plans" on other people - we like to let them choose which plans they think suit them best and learn from their own mistakes. We would rather a thousand plans were tried all at once. Some of those plans might turn out to be bad: a waste of time, money, and resources, but at least only a small number of people will be affected by then. (If the stakes are high enough people can choose to get insurance against a plan going wrong.) On the other hand you might have a solid plan that sounds great on paper but when you try it out it turns out to be terrible. On a free market when that happens the bad plan goes out of business, but if the government has implemented that plan over the entire nation the results can be disastrous.

When many flowers bloom, good ideas become adopted more widely, and as they do they can be tweaked and upgraded because there is not yet a massive infrastructure churning out that plan for everyone in the country. The infrastructure around an idea builds as it becomes more popular meaning that if a product is good but could be better new versions can come out before everyone is issued with the first version.

To illustrate the importance of this point, lets suppose some politician with good intentions decides to invest billions of public money subsidising a new solar panel roofing product which he believes in, and tens of thousands jump to the opportunity to get them cheaper. Three years later another company invents a new solar product that is 20% cheaper more efficient. Those public funds have just been wasted on an inferior product due to someone's solid plan. It would have been better if a smaller number of people bought the inferior solar paneling, and a larger number waited until the new model emerged. These things are too unpredictable for central planners to account for and so the market is the best arbitrator of how soon and by how many people new ideas are adopted.

Libertarianism is essentially about the humility to know that you don't know. No one does. No individual knows better than the combined genius of the entire society testing out products and services created by the best designers each particular field. Making those experts in charge of running their field is no solution either. They might have good information about potential advances in their particular area of expertise, but they don't have the knowledge of everyone's needs, wants and preferences which are constantly changing in real time, neither can they have knowledge of future advances, or knowledge of how every element of their ideas may work out in the real world once tried, or which elements could be tweaked and re-optimised. They can't possibly have all the economic, social, political, historical, etc, etc., etc. knowledge from all possible other fields to make sure that their dictates run smoothly, or that they are the best dictates that could be dictated.

So if libertarians don't have any solid plans, thank goodness for that. At least no one is trying to plan your life for you. Our solutions are simple, if you get the incentive structure right for solutions to flourish then the best solutions will win out over time and the rest will fall into place. It's not a perfect system owing to human error, but it's a self-correcting system where the consequence of bad decisions are limited and lead to better decisions in future. That's the most important thing.

A. S. 10/12/16

If you liked this article you will also benefit from reading Economics is Elegant! (not boring).

Thursday 8 December 2016

Government "investing in small businesses" is a crock.

A recent press announcement reported that Scottish Enterprise, the main economic development agency funded by the Scottish Government, has  £15.2 million investment in Aquamarine, a wave energy company that went bankrupt last year, following a £16.3 million investment in Pelamis, another wave energy company, which was biggest write-off in the agency’s 25 year history.

One thing you can guarantee is that if the government has to fund it, it's not worth funding.

To most people the idea of Government giving grants to small businesses is relatively benign. I mean, why not give the little guy a leg up to compete with the big boys?

Well because this attitude belies a basic lack of understanding of market forces and the role of the investor on a free market.

The purpose of an investor is to try to predict - from all of the potential projects and producers they can possibly choose from - which ideas are most likely to be successful. Consumers have to make choices over what to buy with their limited resources out of literally every product that is available to them, so what they buy is a pretty good indication of what they value. Managing to guess correctly what people are going to want in the future is no easy feat, and doing it well really is providing an invaluable service by limiting waste through overproduction of things people don't want, and the allocation of resources to promote advancements which people decide, of their free volition, improve their lives.

If an investor chooses wisely then they will receive a more generous a return on their investment, if they choose poorly they forfeit their outlay. This means that people who make good decisions with financial resources become more wealthy and have more resources to invest in projects, while those who make bad decisions will soon find themselves out of pocket with less capital to squander on wasteful investments. In this way the market has a natural mechanism for allocating resources to good custodians of those resources: people who excel at spotting a good idea.

It's a beautiful system because the only way investors can grow their wealth is by making it available to the community. If they decide to spend it instead it goes to someone else, if they hide it under a mattress their wealth will stagnate, and if they save it in a bank someone else will lend it out on their behalf.

Government simply does not have "skin in the game" and therefore is likely to allocate money along political lines rather than those which serve the preferences of average individuals.

There remains a prevalent belief that the enlightened self-interest of investors who stand to gain from investing will be insufficient to inspire the rich to part with their money, and so there is a necessary role for Government to step in as an investor. This, in fact, was one of the central doctrines of John Maynard Keynes who believed that markets, left to their own devices, were likely to suffer from a chronic lack of investment as-such because they were inherently unstable, and so there was really no rational basis for making investments in long term projects. I would contend that if entrepreneurs who do have "skin in the game" are unwilling to risk their hard-earned pennies on a potential failure then the government certainly has no place playing poker with the hard-earned pounds of the tax payer. More could be said, but a further discussion of Keynes (and his errors) will have to wait as it goes without the remit of this article.

Fundamentally, the idea that small business will always be at the mercy of large conglomerates is largely a leftie myth. Yes, in several ways big business has the advantage - they can buy inputs in bulk for cheaper giving them economies of scale, they can avail themselves of large advertising campaigns, they can (regrettably) lobby the government for special privileges, contracts and unearned advantages, and may have other privileges, but they are at a disadvantage in at least one important respect. The larger a company is the more difficult it is for any one individual or group of individuals to keep a handle on all the relevant information necessary for making good decisions in the interests of the entire body. Large organisations tend to chunk down into smaller bodies of up to 150 people, and then these bodies have to be coordinated from the top down. Because of this, some areas of the body are likely to be running more inefficiently than others, and changing the protocols of production over a mass scale may be slow, and slower still the larger scale the production is. Picture the relative difficult in changing the course of an oil tanker as opposed to a number of smaller, more agile crafts. Small agile businesses - which may not be able to compete with Goliath competitors as a whole - can still chip away at sections of their markets by being more in touch with consumer preferences on the ground. They can cater to niche preferences with personalised services and superior, custom-made products, while Goliaths produce standardised products for mass consumption. A good selection of Davids and Goliaths will give consumers the best choice. A large company may be in many markets, while a David only needs to monitor a few, and can monitor them with precise clarity owing to the small scale of their operations. A number of Davids can chip away at a Goliath from all angles and even bring him down if he gets too complacent.

Sometimes people worry that large corporations will just buy out successful small businesses to prevent this from ever happening, but even those worries are misplaced. If David has a great product, and Goliath has a large infrastructure and access to larger markets, absorbing David's product into his company can only help a far greater number of people get access to whatever advancement might otherwise remain a niche product.

All this is not to say that there is nothing government can do to even the playing-field for start-ups. There are many ways the Government can help small businesses compete with large established conglomerates, and in doing so help increase the number and quality of option available to consumers, but these do not involve handing out tax payer money to pet projects. Making it easy for small businesses to hire people without too much (or any) form filling and bureaucracy will save them time and money consulting experts, simplifying the tax code will stop them having to employ expensive accountants, and stripping back the regulatory structure so that rules are intuitive and easy to comply with will save a heap on lawyers. Big businesses can afford to have these employees on staff, small businesses often cannot.

When anyone can start selling and hiring the moment they have an idea for an innovative new business we will soon see a renaissance of people "pulling themselves up by the bootstraps."

Friday 2 December 2016

Trump's Views Against Free Trade are Dumb


Now that the election is over Donald Trump is fair game for criticism even to those among my network who supported his election (or voted for him) because of their certainty that Hilary Clinton was a worse option on immigration, foreign policy, economics, or for any other reason. And I will be criticising. It's nothing personal, it's just business. Trump is clickbait, I have important things to teach about economics, and if I can get interest by breaking down his policies then I see no reason why I should not invoke his name.

Trump is not a libertarian candidate on any of our three platforms (foreign policy, civil liberties or economics); but as this is an economics blog its only his economic platform I will discuss. If Trump's supporters (and even his detractors) can see clearly on these issues than perhaps they can influence him by assimilation. The fact is, for the main part, your average person - whether they are a Trump supporter or hater - doesn't know why these policies don't work and so I figure it's well worth an explanation.


Trump's economic policies seem to comprise of a strange mix right-wing nationalism and left-wing opposition to free market capitalism on the dubious grounds that it is "bad for workers." (Slip in "American" before workers and you get the combination of the two.)

I think Trump largely made these appeals on the campaign trail because they are populist in nature and can win votes by an age old method. Identify an external enemy and decry them, then declare your ability to combat and defeat them. In Trump's case, this enemy has been China, and while I am glad that he chose a trade rival rather than a military one (so glad!) I really hope that he does not start a trade-war with China when he takes The Oval Office.

Despite Trump's protestations, it does not damage a nation when jobs are moved abroad because that nation can import those products from nations where they are produced cheaper. In economics this is called the principle of Comparative Advantage. Each nation is particularly proficient or well suited to producing certain types of goods and services - and each can benefit from trading with others for that reason. This applies even if one nation is better at producing more or even all goods than the other. (Rather than reinvent the wheel by explaining this allow me to signpost you to an article that does it sufficiently well.) (also see: http://www.investopedia.com/ask/answers/09/law-comparative-advantage.asp)

Each nation can benefit from specialisation and producing what they are best at, and the free market will naturally tend to flow towards them doing that through the incentives that it offers. (The more nations do this the richer they will become, the less they do this the poorer they will become.) The incontrovertible fact is that labour costs are particularly high in America as compared to poorer countries and therefore their comparative advantage is not largely in manufacturing at the moment. What this requires of America, as a nation, is that they move more towards a skills economy and away from a manufacturing one. America is frankly too rich for most manufacturing jobs, and it doesn't make any sense for most of them to be done in the USA. If those jobs are allowed to be moved abroad to poorer countries over a period of transition, in the long term everyone stands to gain. As those goods will become cheaper, Americans will be able to benefit from lower living costs and will have more left over to spend on other products (American or otherwise.)  Poorer nation will also benefit from the influx of American dollars which they can then spend on goods that will increase their own living standards. Trump has decried trade deficits, but the big secret is that dollars can only be spent on American products and so must find their way back to America eventually in the form of increased imports.

What is more, as those countries become richer and develop, more people in those countries - too - will move away from agricultural and manufacturing jobs into thinking professions. When they do this will be a boon for the entire world; those populations will themselves begin inventing all sorts of ideas and devices that will benefit Americans.

America should kiss most manufacturing goodbye and focus on creating a dynamic, diverse, highly intellectual and skilled workforce. That will require reforming the schools, and abolishing all minimum wage laws restricting internships so that people can take low paying jobs to learn skills that lead to high paying jobs. This would also allow the movement of manufacturing to be phased out rather than removed all at once as lower wages will encourage businesses to stick around longer.  (Note Trump has said nothing about freezing or reversing minimum wage, in fact he said it should be raised to $10 an hour. If you think the minimum wage is a good thing let me signpost you to this article which explains in detail why it is not.)

Trump appears to think that other countries dumping cheap Steel in America is bad for Americans, because it undercuts American-produced steel, but that is not the case either. The very idea was satirised by Frederic Bastiat in his essay Candle Stick Makers Petition, where the candle-makers claim that it is unfair that they have to compete with the sun which is giving out free light and so the government should blot it out. When foreign steel is dumped in America. it is going to benefit every industry that uses steel. Even if the domestic steel industry suffers for a while, of what consequence is that to the wider economy? That's like saying it's unfair to the fridge-makers if your neighbour offers you his spare fridge for free. The value of steel is only going to increase in the long term as it becomes more scarce - and at the time when it becomes profitable for the domestic industries open up again later their product will sell for a higher price. Saying this is bad is like saying that someone paying half the price of your car for you is bad. It is only nominally bad to some small number of individuals, it is not bad over the economy as a whole.

Trump is not all bad on economics, he has spoken out against trade deals like "NAFTA." But is it for the right reasons? Free Trade agreements should be written on less than one page. They should simply say "Lets trade." It seems that Trump is angling at "a better deal for American workers" as if such a thing could exist. The best deal is the deal that says anyone can trade with anyone at any time. Any restrictions mean that a small group may be profiting at the expense of everyone else. The agreement to trade is a private agreement between two individuals that government should have no involvement in whatsoever.

Trump stresses that income tax was not an original mandate of government, and that is good. But he wants to replace it with tariffs on "foreign goods." Perhaps tariffs are better than income tax, but that is not the final judgement on the matter: being punched is also better than being stabbed.


Now I defer to the words of a facebook user, who gives a great explanation:
"In understanding the benefits of division of labor, we first understand that wealth is not measured in currency accumulation - wealth is measured in time. The natural state of man is scarcity and poverty, it has been a recent phenomenon that we have been able to improve the standard quality of life for human beings on this planet. We can relate this to the amount of time or labor now required for the average person to acquire basic necessities for existence - food, shelter, clothing. Without division of labor, I would be left to make my own clothes, to hunt for my own food and to build my own shelter with my labor alone. When we engage in trade, markets emerge which then allow specialization so that each individual can focus on providing his/her time towards the most efficient use of the world's scarce resources. Of course, we know this general process to be known as the free market, whereby all of human action works towards a spontaneous order in which profits reward those that satisfy consumers by their responsible and efficient use of our precious resources, and losses ensure that those who fail to deliver these means to the proper ends either learn from the errors of their ways or move on to find an alternate use of their time. The key to understand is that the spontaneous order of the market is constantly at work to ensure that scarce resources are allocated to their most efficient ends. Over time, savings and investment lead us to improved capital structures, which lengthen the structure of production, but increase efficiency and output. Increased output makes it so that purchasing power is increased by greater abundance of goods and thus general welfare is increased.

So if time has a direct relationship to wealth, the more goods available to the market place, the richer we are. Trump frames the argument that China is taking our jobs by producing lower priced products and therefore China is winning, and we as Americans are losing. The fatal error with this logic is the failure to understand that not only are we all producers, but we are also all consumers. If able to create a product for lower price then that means that less of our income is needed to be spent on that particular good, meaning that less of our TIME is needed to be exchanged for purchase of that good. To this principal, a nation's borders have zero relevancy. To illustrate, if I earn $10 per hour and the average TV is $500, then I must work 50 hours in order to exchange my earnings for that TV set. If the TV is produced at a lower cost so that it is then sold for $250 then I am now more rich because I only have to work 25 hours to exchange my earnings for that same TV. Following the logic of Trump's argument, if we are to focus only on protecting my earnings as a producer, and not my purchasing power as a consumer, then the market scenario would be less favorable. In this anecdote, our ability to produce this TV in the US at a higher cost is granted by the government, by way of tariffs. In a narrow sense, on the margin, the producer of the TV benefits, but society as a whole is poorer. The TV producer keeps his job, but we must all spend more of our time to acquire this good. In the long run, because this protectionist policy will not be limited to just TVs, the TV producer will also be worse off because other goods will cost more under the same economic laws."

Ron Paul also wrote that Donald Trump promises to bring back jobs to America without understanding the major policies that led to their departure in the first place. The financing of America's warfare/welfare state through the printing of phony money by the Federal Reserve and distorted interest rates that encourage consumption and discourage saving and investment.

Trump is right that there aren't enough jobs in America, but the solution is deregulation rather than regulation of international trade. He claims that American car manufacturers are suffering, but the solution for that is not to tax the import of goods from abroad, but to make better stuff. No one wants an American car, because - frankly - American cars suck. Once upon a time, under Hoover, America manufactured watches that counted a 58 minute hour. Rather than allow people to continue to buying superior watches from Switzerland, the government decided to put a tariff on Swiss watches and provoked the Swiss into boycotting American products like cars, typewriters, air conditioning, and so forth. The policy is as stupid now as it was back then.

Hopefully Trump will deliver better economic policies than his rhetoric suggests, he has for example spoken about the importance of deregulation and making it easy for people to start businesses and employ people. Perhaps his patriotic protectionist parlance was just pitching to the crowd.