The Cost of 9/11

Each square represents $1 billion.

FlowingData has an excellent visualization of an article from the New York Times on the cost to the United States of the attacks that took place on September 11, 2001.

Al Qaeda spent roughly half a million dollars to destroy the World Trade Center and cripple the Pentagon. What has been the cost to the United States? In a survey of estimates by The New York Times, the answer is $3.3 trillion, or about $7 million for every dollar Al Qaeda spent planning and executing the attacks. While not all of the costs have been borne by the government — and some are still to come — this total equals one-fifth of the current national debt. All figures are shown in today’s dollars.

The chart is sobering, but it perhaps serves to illustrate that the best response to a terrorist attack is not to launch a campaign of global imperialism. As well as the diversion of $3.3 trillion away from private, productive investment to public destruction, American interventionism has served to alienate and radicalize groups of young Muslims around the globe, who rightly believe that bombing groups of innocent civilians is wrong. They may be misguided, but no one could dispute they have a point.

It is also worth noting that in the end, Osama bin-Laden was killed by two dozen Navy SEALs and four helicopters.

Patents Harm Consumers

A German court has ruled that Apple has a legitimately enforceable patent on tablet computer designs that are “minimalist [and] modern”, and in doing so has forbidden Samsung to sell one of its newest, most popular products – the Galaxy Tab 10.1 – to the consumer. Should it attempt to so willingly satisfy the desires of the public by producing a touch-screen device the front of which is dominated by a, well, touch-screen, it will be subject to fines and forced to pay damages because Apple somehow “own” the rights to that design.

Whilst it would be tempting to blame the presiding judge, Johanna Brueckner-Hoffmann, such a move would too easily absolve of blame the German patent authorities who are actively harming consumer choice by granting patents that are by virtually any measure too broad.

Bring Out the Shovels!

The enormous fiscal stimulus passed by the United States government in 2009 failed, even by its own standards – unemployment has remained higher than the administration’s worst-case predictions and placed an enormous burden on future generations of American taxpayers. Not to be derailed by the evidence, of course, President Obama has announced more Keynesian stimulus spending in an attempt to “create” jobs.

You would have thought that someone in the White House would have realised by now that taking money from the private sector and spending it in the public sector will not create employment, nor solve the underlying structural issues in the US economy.

On stimulus, Cafe Hayek has this excellent letter to the Weekly Standard.

An Addiction to Regulation

It hardly takes a D.Phil in economics to realise that many regulations can be harmful to business and free trade, particularly small enterprise. Philip Greenspun, who runs a single-man helicopter company – has a brilliant example of how absurd the government web of rules and directives has become:

I’m subject to the same drug testing requirements as United Airlines. I am the drug testing coordinator for our company, so I am responsible for scheduling drug tests and surprising employees when it is their turn to be tested. As it happens, I’m also the only “safety-sensitive employee” subject to drug testing, so basically I’m responsible for periodically surprising myself with a random drug test. As a supervisor, I need to take training so that I can recognize when an employee is on drugs. But I’m also the only employee, so really this is training so that I can figure out if I myself am on drugs. As an employee, I need to take a second training course so that I learn about all of the ways that my employer might surprise me with a random drug test and find out about drug use. But I’m also the employer so really I’m learning about how I might trap myself. 

Gross Domestic Product – Simplistic, Centralising and (Virtually) Useless

With another quarter of data on the United Kingdom’s gross domestic product (GDP) came yet another day of wall-to-wall coverage on the BBC and another media news outlets reporting on the “health” or otherwise of the British economy. The coverage I saw on the BBC never seemed to scratch beneath the surface, other than to imply that a significant increase in GDP is good and a fall (or a lower-than-expected increase) is “bad”. Politicians, of course, were perfectly happy to perpetuate this fallacy, with the Leader of Her Majesty’s Opposition, Ed Balls, saying “These figures show that last year’s recovery has been recklessly choked off by George Osborne’s VAT rise and spending review”, whilst the Chancellor of the Exchequer claimed “It is positive news too that at a time of real international instability we are a safe haven in the storm.”

The problem with gross domestic product as a measure of economic prosperity is that it considers all spending equally valuable. Whether ten pounds is spent on a nurse, a teacher, food, or digging a hole in the middle of a field and then for it to be filled up again moments later, the “gross domestic product” of an economy will increase by ten pounds. In this way, a country’s GDP doesn’t represent how well off a people are – that is, how far the desires of the people are satisfied by other market participants. Austrian economists from Karl Menger onwards form part of a long tradition of explaining how values are entirely subjective and hence why it is false to say that money spent in one way produces results of equal “goodness” to spending it another way. On this view, then, it is clear to see why gross domestic product is largely useless – the state could increase the money price of all goods produced in the economy by employing half the population to build walls and the other half to knock them down again; this would increase GDP, but as a country we would hardly be better off.

 

Property Rights, Not Regulation

The European Union has unveiled a complete overhaul of its Common Fisheries Policy, designed to prevent the endemic over-fishing of marine stocks in European Union waters. The previous incarnation was a centralised, distant and ineffective mess which did little to conserve fish stocks and much to line the pockets of special interests. In the 28 years it has been in effect, European boats have been forced to cast over the side thousands upon thousands of tons of dead fish to avoid exceeding set quotas, a move which has ultimately hurt fishing fleets both small and large. It is a relief that the Commission has recognised the abject failure of the CFP, with the Commissioner for Fisheries stating,

There is overfishing; we have 75% overfishing of our stocks and comparing ourselves to other countries we cannot be happy. So we have to change. Let me put it straight – we cannot afford business as usual any more because the stocks are really collapsing.

Indeed, the new policy has a number of features that are a vast improvement on the previous regulations. Specifics with regards to particular fish in particular seas will be largely devolved to individual states and the whole approach will mean a transition away from subsidy that has helped maintain inefficient fishing fleets and fishing boats. The proposals, however, do nothing to tackle the real reason for the seemingly terminal decline in European fish-stocks – that is, the lack of property rights and the strong economic incentives for conservation that come with them. Bureaucrats in Brussels, or London, Paris or Vilnius have no financial incentive to conserve fish stocks, and have no way of knowing whether their diktats lead to an efficient resource allocation. In other words, they are distanced from the impact of the decisions they make and face no financial repercussions should they fail in the performing of their job. The new regulations fail to overcome what economists term the “tragedy of the commons” – where everyone is free to exploit an economic resource, then individuals will tend to fish as much as possible to gain what they can before someone else comes along and does the same.

This latter situation is avoided where clear property rights exist. If I own a certain resource and make my living from it, then I have an economic incentive to conserve fish stocks so I can continue to benefit from my property over the long-term. It is a misconception to think that businesses only think short-term when it comes to resource consumption – indeed, the reverse is true.  Where I can exclude others from using my property, I will be able to prevent over-fishing and be able to tailor my fleet to take the best advantage of what I own. Moreover, and just as importantly, a business-owner who owns a resource will face the market test of profit and loss – where he does a good job, he is rewarded with profits. Where he fails to be efficient or effective in serving consumer demand, he suffers a personal financial penalty, unlike distant civil servants in the palaces and chancellories of Europe.

History is replete with examples of the over-consumption of resources thanks to “common” ownership – that is, where individuals have no direct personal stake in long-term resource conservation. It is also replete with examples of private owners ensuring that resources are used effectively and will continue to be so long into the future. Be it herds of elephant in Africa, forests or grazing land in the United States and Europe, the private sector has consistently demonstrated that it out-performs by a wide margin the state in attempts to ensure sustainability. Allow fishing stocks to be privately owned and the problem of over-fishing will all but disappear, all without burdensome regulation and crippling subsidies and diktats.  Of course, such a policy is, sadly, unlikely. Property rights don’t help to line the pockets of special interest groups, do they? In European politics, it seems that this is, sadly, what ultimately matters.

2 + 2 = 5

Another month, another recruitment drive at Tesco in an attempt to encourage as many staff as possible to join the Union of Shop, Distributive and Allied Workers. It is usually a very predictable affair, with my refusal to join coming just seconds after they’ve finished saying their brief piece of recruitment spiel. Sadly, pushing trolleys offers little chance for diversion, so this time I thought I’d pass a bit of time and discuss with him the impact of unions on the labour market, given his insistence on asking me why I refuse to join (aside from the fact I’m only there for another month or so).

Many in unions, including the fellow who was talking to me, are good, decent people who do genuinely want to help those they represent. Yet I was struck by the fact that he seemed unable to move from premises to the conclusions that must follow. He agreed with me that if a wage rate is artificially increased above market-clearing level, then there must be people who are left without employment because their skills do not result in the marginal labour product to justify their hiring. Put a more blunt way, unions benefit those who are members but only at the expense of others, those who are not members. His response to this was, with some justice, that those people could find employment in another job. There are of course arguments on economic efficiency grounds that could be made against having this position, but I didn’t have an opportunity to go into them at the time. The main problem with this view is that the representative of USDAW explicitly supported the full unionisation of the workforce which would increase all wages above equilibrium levels and leave some permanently unemployed. If this is not the case, as would have to be argued to support the view that unions don’t create unemployment, then it seems union membership loses one of its main benefits, viz that they help improve substantially the pay of their membership. The union representative, however, refused to believe this was the case – he supported all the premises I put forward, but still argued that unions don’t cause excess supply of workers in the labour market, for reasons that seemed to elude both he and I. He could see how the impact of unions on a single company or sector, but was unable to apply that logic to the economy as a whole.

From the BBC

Here are a few links from Auntie Beeb that have caught my eye today.

The 9th of July 2011 is the day that the United Nations welcomed its 193rd member: the Republic of South Sudan was declared an independent state admit jubilant celebrations in Juba, the main seat of government. The BBC also has this interesting profile of the new country. (Incidentally, I’m becoming quite infuriated with the Corporation’s insistence at calling South Sudan a “nation”, but that’s another matter.)

Nick Robinson has an article on a speech given by John Major on the issue of devolution in the United Kingdom. I particularly enjoyed reading, “My own view on Scottish independence is very straightforward: it would be folly – bad for Scotland and bad for England – but, if Scots insist on it, England cannot – and should not – deny them,” although I’m yet to read the whole speech in full. [Emphasis mine.]

The News of the World, due to be closed this weekend after 168 years, is printing five million copies of its final edition. The paper has been torn apart by the ongoing scandal regarding the hacking of the telephone lines of various high profile figures.

And finally, although not particularly related to this blog, this page allows the Atlantis space shuttle to be tracked undertaking what is the last mission for the Space Shuttle programme.

The World’s Newest State

The 9th of July is set to represent the founding of the newest member of the international club, the Republic of South Sudan, after years of conflict in the region. Although there have been continuing disputes since the independence referendum in February this year, the think tank Chatham House has argued that secession presents a number of opportunities for peace and development.

There’s nothing controversial in the article, but I think it is worth pointing out a number of the other benefits to secession from states, generally. Competition between states will over time lead to lower tax rates as competition for investment increases, increasing human development levels. Of course development is more complicated an issue that simply lowering tax rates, but investment from abroad has proven to be a key driver in raising standards of living. Secession also reduces the centralisation of decision making, given that the new state will control a smaller area in total than the state from which it gains independence. Planning is of course best done at the individual level, but where it is done by others, local decision makers will produce better results given that they have greater knowledge of the area which they control.

Incidentally, “The Republic of South Sudan” seems to be something of an uninteresting name compared to some of the others proposed and considered, particularly “Kush Republic”.

Later: Voice of America has it that the North Sudanese have reinforced their military units deployed in an already-contested region bordering the South.

Crunch Time For the Euro?

Germany’s highest constitutional court, the Karlsruhe, is due to rule on the legality of the bail-outs of various eurozone members, although The Telegraph reports a decision is unlikely to be made before September. The potential implications are huge, even if the judgment is one of  “yes, the legality is questionable, but…”.

Of course the European Union could well attempt to carry on its present course regardless – it has shown little regard for extant law, and as the ever lucid Daniel Hannan puts it,

It is precisely because the bailouts are illicit that the the Treaty is being changed: rather than amending its behaviour to comply with the law, the EU proposes to amend the law to comply with its behaviour.

Whatever the eventual outcome, it will definitely be a story to follow with interest.

Edit: Also on the euro, The Economist has this excellent graph and article on the seemingly inexorable rise of Greek bond interest rates and the ever-decreasing effectiveness of the steps Eurozone leaders are taking to avoid default, although some commentators have argued it already has given the rollover of its sovereign debt.

Finally, why a Greek default might not mean the end of the euro – the risk of default is already priced into the currency by the markets, according to Brad McFadden.