Henry Spearman, the Sherlock Holmes of economics

Seeing Milton and Rose at the top of the masthead made me think of the Marshall Jevons crime fiction series:

Marshall Jevons is a fictitious crime writer invented and used by William L. Breit and Kenneth G. Elzinga, professors of economics at Trinity University, San Antonio and the University of Virginia, respectively.

It was Breit’s notion to write a mystery novel in which an amateur detective uses economic theory to solve crimes. Elzinga was enthusiastic about his colleague’s idea and not only encouraged him to proceed but also decided to take an active role in writing the book. Over the next twenty years, on top of their academic schedules, Breit and Elzinga co-authored three mystery books featuring Harvard economist-sleuth Henry Spearman. The first Henry Spearman Mystery, Murder at the Margin, came out in 1978, and was followed by The Fatal Equilibrium (1985), A Deadly Indifference (1995) and The Mystery of the Invisible Hand (2014).

Ken Elzinga was at Freedomfest, attesting to his fine economic credentials, and gave a presentation on how he came to write the series with his partner who has unfortunately passed away. But the one thing that I learned that has helped bring the books alive – I am reading the third one right now – is that the main character, Henry Spearman, is designed after Milton Friedman, Professor of Economics at Harvard though he may fictionally be. And the one problem they had in writing the series was that Rose Friedman did not see herself mirrored by Pidge Spearman, and for reasons I cannot see doesn’t like the way Henry’s wife is depicted. The books are fun to read, but are better if you are an economist, although it is not an essential. A large part of their sales, it turns out, are as assigned texts as part of an economics course.

Posted in Cultural Issues | 4 Comments

Hard. Very hard.

The mother of the 13-year old that Adam Goodes had identified as being the face of Australian racism has spoken out.

I do think people shouldn’t boo him at the football, they should be trying to encourage him to be a better person than what he is.

Fair comment.

As we commented at the time (here and here and here) the incident was disgraceful. Particularly so as Victoria Police subsequently bragged about how the child had a police “grilling” for two hours after the event. Somewhat ironically, I think, the then Victorian police chief Ken Lay is now on a national advisory panel looking at family violence.

Posted in Hypocrisy of progressives, Politics | 101 Comments

Wednesday Forum: July 29, 2015

Posted in Open Forum | 1,563 Comments

CO2 as plant food

A handy 4.5 minute lesson from the founder of Greenpeace, slaying the dragon of CO2.

RIP “carbon pollution”.

Posted in Global warming and climate change policy, Rafe | 30 Comments

Happy birthday Karl 28 July 1902 to 1994

True ignorance.

Freedom and security.

Against dogmatism.

“I had another good innings with Wolfgang Pauli in Zurich” (Unended Quest section 27).

He might have opened the innings for Austria or even New Zealand if he only had half-decent coaching at school.

Posted in Uncategorized | 2 Comments

“Sorry I don’t buy it”

Tim Blair has an interesting column on Tony Burke and the drownings at sea that have filled his heart with sorrow. But what is truly interesting is the comments thread which brings us back to reality. I will just reprint the first three and you can read the rest for yourself.

Niki 1 day ago
A fine article Tim. I say with my hand on my heart, and regret to feel the need to say it, but I have no faith in Labor or Mr.Burke doing anything different if they regain government to what they previously did. I am so sorry but the damage done, lives lost and the damage done to this country I cannot forgive … at the moment anyhow.

Mark 1 day ago
It’s just mind boggling to think that according to all the most recent opinion polls that these clowns are expected to give the government a run for their money at the next election, seriously, not even the most ignorant ALP supporter truly believes that they will form the next government or in fact are deserving of it.

Chris 1 day ago
If he was so concerned why did he continue to reject the LNP’s successful plan, it has taken 2 years for him to find his moment. Sorry I don’t buy it. I think it is all just politics he is trying to make us think they have changed their position. Don’t be fooled they have not changed. If elected the boats will restart.

Now read the rest.

Posted in Cultural Issues, Federal Politics | 23 Comments

Trade union mythology – collective bargaining evens up the share for labour

Main paper

8. Collective bargaining to even up the shares between labour and capital.

Reasonable and peace-loving supporters of the labour movement may concede that violence in industrial relations is an evil, but they may argue that it is (or was) a necessary evil to obtain justice for the downtrodden and disadvantaged. Can these people continue to defend the strike threat system if it is demonstrated that the main beneficiaries are the most reckless and violent players, the “bloody aristocracy of labour” whose members achieve pay and conditions that most other workers, white and blue collar alike, can only dream about?

The humanitarian purpose of collective bargaining is to improve the lot of the working class as a whole by a redistribution of wealth from capital to labour. This is the central point that Hutt contested in his two major books on collective bargaining and the strike threat system. Those books argue, in some length and detail, that claims enforced by the threat of strikes can only advance sections of the labour force at the expense of unorganized labour, the unemployed and the community at large without affecting any overall transfer of wealth to the working class at large.

He spelled out how the threat to disrupt the entrepreneurial process by the concerted withdrawal of labour (boosted by supplementary force) has:
1. severely curtailed the wages-flow;
2. raised the cost of the capital resources which constitute labour’s tools;
3. extensively attenuated the wage-multiplying power of the assets provided;
4. aggravated inequalities of income;
5. materially worsened industrial relations, tending to destroy the workers’ dignity, their pride in achievement and their sense of purpose;
6. often frustrated attempts to improve conditions of employment in the work-shop and office;
7. mitigated against the market provision of employment security;
8. through the increasing pressures of ‘wage-push’ in recent years [the 1920s], been mainly responsible for the political expediency of inflation.

As far as Hutt could find in the literature, unprotected and non-unionised workers gained proportionately as much from general upward movements in productivity as workers in unions. It seems that there is no clear correlation between the degree of unionization and the speed of wage-rate increases. The exceptions to that pattern are (a) the “bloody aristocrats of labour” who do better than average and (b) workers (or the unemployed) who do worse than average either because they are excluded from any kind of work by “the going rate” (wage rates set too high which render them unemployable) or because they are kept in lower paying jobs by exclusive practices enforced by the strike threat.

On point 1 above, Hutt referred to some tendentious writing by the Webbs regarding the eighteenth-century unions being “forced” into demanding protection because the industries in which their members were employed were menaced by “pauper labor.” Hutt argued that the industries where union members were employed would have prospered if labor had been recruited from less productive and less well-paid occupations. Releasing the “paupers” from their poverty would have enabled them to buy goods and services and generate multiplier effects that would benefit an ever-widening circle of trades and industries. In his view the unions were simply asking for protection of sectional privilege. “The interests of those referred to as ‘pauper labor’ were regarded as of no importance, either by the unions or – (in this context) by their famed defenders, the Webbs.”

Point 5 is illustrated by a story told to me by an elderly German migrant who had been a skilled metalworker. During the war his house was destroyed by allied bombing and so he slept at the factory which was also substantially damaged. At the end of the war there was no direction from anyone and no home to go to, so he and his fellow workers set to work to rebuild the factory. He came to Australia and plied his trade in a metalwork shop. Late one afternoon he made a mistake with a job and he was still making good the damage when the “knock off” hooter sounded. A shop steward appeared and told him (with some interesting use of language) to desist. He protested that he was fixing up a mistake in his work. It was his fault and he just
wanted to make it good before he went home. The shop steward promised that if he tried that stunt again the whole shop would be called out on strike. So much for commitment to quality and personal responsibility.

The cure that Hutt proposed was the enactment of the principle underlying the British Combination Acts of 1799 and 1800 adapted to the present day. The reform suggested:
1. would bring to an end an era of distributive injustices and tolerated poverty-creation;
2. would raise the material welfare of perhaps 90% of the people;
3. would release resources for new occupations in which the product enriches life;
4. would enormously increase income security; and, above all,
5. would bring about an unprecedented improvement in the quality of human relations.

Remarkably, William Stanley Jevons anticipated much of Hutt’s case in his book Methods of Social Reform and Other Papers (1883).

Firstly. The supposed struggle with capitalists in which many Unions engage, for the purpose of raising wages, is not really a struggle of labour against capital, but of certain classes or sections of labourers against other classes or sections.
Secondly. It is a struggle in which only a few peculiarly situated trades can succeed in benefiting themselves.
Thirdly. Unions which succeed in maintaining a high rate of wages only succeed by PROTECTION—that is, by levying contributions from other classes of labourers and from the population in general.
Fourthly. Unionism as at present conducted tends therefore to aggravate the differences of wages between the several classes of operatives; it is an effort of some sections to raise themselves at the expense of others.

At the end of the argument Jevons concluded:

The Unionist overlooks the fact that the cause to which he is so faithful, is only the cause of a small exclusive class; his triumph is the injury of a vastly greater number of his fellow-workmen, and regarded in this point of view, his cause is a narrow and selfish one, rather than a broad and disinterested one. The more I admire the perseverance, the self-forgetfulness, the endurance, abstinence, and a hundred other good qualities which English workmen often display during the conduct of a great trade dispute, the more sincerely do I regret that so many good qualities should be thrown away, or rather misused, in a cause which is too often a hurtful one to their fellow-men.

Posted in Uncategorized | 9 Comments

John Stuart Mill explaining what is wrong with Keynesian theory

I have just posted an article on “Mill’s Defence of Say’s Law and Refutation of Keynes” as part of the Liberty Fund discussion on “Reassessing the Political Economy of John Stuart Mill”. If you are interested in knowing how far economic theory has gone wrong since the Keynesian Revolution, you ought to have a look at this thread which includes not just me, but also Richard Ebeling, Nicholas Capaldi and Sandra Peart. However, my latest post is due to the editor at the Liberty Fund picking up an offhand comment of mine and asking me to expand. Why this did not occur to me on my own, I cannot say, but this is the first time in which I have written a condensed version of what is wrong with Keynesian macro using Mill’s Principles as the basis for understanding pre-Keynesian theory. This is the final para but I do encourage you to read it all.

Reading the three sections of the Principles together we find Mill arguing:

  • recessions do occur and when they do the effect on the labor market is prolonged and devastating;
  • recessions are not caused by oversaving and demand deficiency;
  • recessions cannot be brought to an end by trying to increase aggregate demand.

That is as complete a rejection of Keynesian economics as one is likely to find, and it was stated in 1848. These propositions and their supporting arguments were with near unanimity accepted by the entire mainstream of the economics profession through until the publication of The General Theory in 1936. Since then they have almost entirely disappeared resulting in a loss in our ability to understand the nature of recessions or what needs to be done to bring recessions to a timely end.

Mill is not hard to understand unless you have learned Keynesian macro first. And then it is very difficult indeed. But if your interest is in understanding things such as why the stimulus was such a catastrophe, I cannot think where better to go to find out than from Mill. And if you are interested in Mill, then you should read this Liberty Fund discussion first.

Posted in Classical Economics, Economics and economy | 3 Comments

Well Tesla my fancy

We are a cynical mob here on the Cat and several, including Judith, have expressed some scepticism about the likelihood of the electric car displacing the internal combustion engine.

Not so some others like Alan Kohler who has been driving a Tesla Model S around which was lent to him by a friend.

tesla

He claims to be sold on the technology.  As well as writing on the matter in Business Spectator and The Australian, he gave this gushing interview with Alan Jones where he said that it was only in the 1920s that petrol engines won the fuel war with electric.  He also suggested that electric cars were not more numerous largely due to the incumbency of oil, gas stations manufactured product etc .

As he explained it, the idea with electric cars is that you leave your car plugged-in overnight like a mobile phone and voila! it is fully charged to ride the next day.  One problem is that the battery has 15,000 times the power of a mobile phone and few people would be able to plug the car into their home mains; some might incur costs of $50,000   to  enable them to do so.  That’s on top of the $110,000  needed to buy the car itself.

Based on the company’s figures, the car uses 18.52kWh/100km.  Converted to dollars and cents using an average electricity rate of 28 cents/kWh, this comes to $5.19/100km.

But the battery wears out and is expensive.  Based on a conservative cost of $31,400, an eight year life and 15,000 km a year driving, then without applying a discount rate, this comes to 3,926/15,000 x 100 = $26.20/100km.  Added to the plug-in costs that means 5.19 + 26.20 = $31.39/100km.

A Holden Commodore 2015 VF Sportwagon with a 3.6L V6 engine (drive away list price $41,564) uses 9L/100km.  With ULP national price average $1.42/L incl. GST, this means a fuel cost 9 x 1.42 = $12.78/100km.  And 26 per cent of that fuel cost represents excise that electricity does not pay.

Alan Kohler argued, “batteries will kill the internal combustion engine and, eventually, coal and gas electricity generation”.  Maybe, but not before we finally see that breakthrough in battery technology that has been coming since 1920.

h/t Bob Aughton

 

Posted in Uncategorized | 152 Comments

What their ABC thinks about footy fans

Francis Leach describing his listeners and the people who ultimately pay his salary:

What a redneck wonderland footy has become.

Every weekend, somewhere in Australia, Adam Goodes steps out onto a footy field.

Simultaneously, an army of gutless drongos get ready to express their contempt for him, hiding anonymously in the choir of clowns who boo his every step.

Hey, bigots, don’t get me wrong.

I defend your right to express your unfathomable sense of outrage and injustice. It must burn long and deep. Probably over the spiralling price of a pie at the footy or the quality of the rubbish beer your (sic) force yourself to drink whilst acting like obnoxious school kids.

Your worries and concerns must weigh heavily on your poor benighted souls. So knock yourselves out. Boo away. At least have the courage though to admit what it is.

Racism.

Naked, loud, contemptible, pathetic and unashamed.

None of this crap about Goodes staging for free kicks, being a “sniper” or sweet talking the umpires is the reason for the booing.

Not to mention 13-year old girls.

(HT: Andrew Bolt)

Posted in Hypocrisy of progressives | 115 Comments