EclectEcon

Plutocracy and Cronyism: Pro-Business.NE.Pro-Market

In today's Globe and Mail, Margaret Wente reviews Plutocrats by Chrystia Freeland.

I'm delighted with her (and the author's) distinction between being pro-market and being pro-business. Too many people somehow get the impression that economists are pro-business when in fact most economists are, if anything, pro-consumer and pro-market.

...[T]he super-elites are often the product of a strong market economy. But as their influence grows, they can become its opponents. They claim they’re pro-market, but what they really are is pro-business. They use their lobbying power to tilt the playing field, not to level it. As a result, serious tensions emerge between a pro-market agenda and a pro-business one.

You’d think the crash of 2008 would have taught Wall Street some humility. Instead, those tensions are as bad as ever. Last year, Mr. Dimon’s firm got into a mess with “whale trades” – a series of huge bets on derivatives that blew up. JPMorgan suffered large losses. But the scary part is that nobody in charge had a clue what was going on. A damning Senate investigation has concluded that bank officials ignored the warning signals and misled regulators and the public. In other words, nothing has changed. Wall Street is still unable to police itself, and the regulators are unable to police it, either.

There are no simple answers to these problems. The fundamental challenges of democratic capitalism won’t be resolved by a wealth tax or by redistributing more money from rich to poor... .  As Ms. Freeland writes, the credibility of capitalism itself is at stake. 

 

The Truth about Economics?

The following graphic was sent to me by JB, my favourite drug dealer.

Sexy, for sure, and sometimes real and sometimes fake. Too bad most of us don't understand the nuances of why economics is sexy, nor do we (meaning economists) have a very good handle on how to sort out what's real and what's fake when it comes to major, contestable policy issues --- though of course we all believe we do.

John Cochrane (aka The Grumpy Economist) has a really good blog post about projections of the US deficit over the next several decades. No matter what the scenario, things don't look so good.

His real point in the above graph and the others in his post is that 

[T]he real budget news that could matter has little to do with tax rates or spending. What matters most of all is whether we break out of this sclerotic growth trap.

And let me add to his post that the best way to promote economic growth is to promote mobility: capital mobility and labour mobility. Encourage people, both workers and employers, to be flexible. Don't legislate rigidities into workplace rules. Don't legislate rigidities into the social safety net. Those rigidities have been shown everywhere to impede economic growth.

As Tyler Cowen once said, "Economic growth is the only effective long-term anti-poverty programme." Or something like that.

PJ Kwong again

I recently sent fan e-mail to PJ Kwong, complimenting her on her solo on-air sportscasting on CBC Bold TV during the World Figure Skating Championships. Here's the message I sent:

Subject: I absolutely love your work on CBC Bold.

I love your tone, your approach, your information. Everything!

http://www.eclectecon.net/2013/03/bless-cbc-bold-and-pj-kwong-cbcs-coverage-of-the-world-ice-skating-championships.html

In the above posting, I refer to you as "The Vin Scully of Figure Skating". I hope you realize I mean that as a VERY high compliment.

I really hope CBC-sports and others will adopt the model she used. She had online chats and tweets going, but she was the only voice on air. It was inexpensive (comparatively), fluffless, and solid. Here is her response today.

I am sorry for the delay in my response but have been trying to get rid of a post-Worlds cold !

 I wanted to be able to thank you properly for your kind words and for the amazing comparison. You cannot imagine how much your support means to me!

 Thank you again J

 Pj

I hope others feel the same way about her work and will also urge CBC-Sports to adopt this style for more telecasts.

The Tragic Folly of "Earth Hour": "Its vain symbolism reveals exactly what is wrong with today's feel-good environmentalism."

Bjørn Lomborg is one of the most realistic environmentalists I've ever read. He goes beyond alleged benefits and looks at costs and feedback effects, and he pays attention to the impacts of changed/distorted incentives. In a recent piece in Slate, he takes on the folly of Earth Hour, scheduled for March 23rd.

[T]he reality is that Earth Hour teaches all the wrong lessens, and it actually increases CO₂ emissions. Its vain symbolism reveals exactly what is wrong with today’s feel-good environmentalism.

... Hypothetically, switching off the lights for an hour would cut CO₂ emissions from power plants around the world. But, even if everyone in the entire world cut all residential lighting, and this translated entirely into CO₂ reduction, it would be the equivalent of China pausing its CO₂ emissions for less than four minutes. In fact, Earth Hour will cause emissions to increase.

As the United Kingdom’s National Grid operators have found, a small decline in electricity consumption does not translate into less energy being pumped into the grid, and therefore will not reduce emissions. Moreover, during Earth Hour, any significant drop in electricity demand will entail a reduction in CO₂ emissions during the hour, but it will be offset by the surge from firing up coal or gas stations to restore electricity supplies afterward.

And the cozy candles that many participants will light, which seem so natural and environmentally friendly, are still fossil fuels—and almost 100 times less efficient than incandescent light bulbs. Using one candle for each switched-off bulb cancels out even the theoretical CO₂ reduction; using two candles means that you emit more CO₂.[emphasis added].

... To green the world’s energy, we should abandon the old-fashioned policy of subsidizing unreliable solar and wind—a policy that has failed for 20 years, and that will fail for the next 22. Instead, we should focus on inventing new, more efficient green technologies to outcompete fossil fuels.

If we really want a sustainable future for all of humanity and our planet, we shouldn’t plunge ourselves back into darkness. Tackling climate change by turning off the lights and eating dinner by candlelight smacks of the “let them eat cake” approach to the world’s problems that appeals only to well-electrified, comfortable elites.

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Cypriot Theft

From the NYTimes,

Under an emergency deal reached early Saturday in Brussels, a one-time tax of 9.9 percent is to be levied on Cypriot bank deposits of more than 100,000 euros effective Tuesday, hitting wealthy depositors — mostly Russians who have put vast sums into Cyprus’s banks in recent years. But even deposits under that amount are to be taxed at 6.75 percent, meaning that Cyprus’s creditors will be confiscating money directly from pensioners, workers and regular depositors to pay off the bailout tab.

I was first told about this situation yesterday by MA who sent me some early information.

It looks to me as if the Cypriot banks lost buckets and buckets of money by "investing" (actually speculating) in what they thought were low-risk mortgage-backed securities up until 2008. Then, in an effort to "stablilize" (i.e. bailout the owners of) the banks, the Cypriot gubmnt bailed them out, all in the name of protecting the depositors.

This sounds much like what happened in Ireland and threw their economy into such a spin. In order to reassure international investors, the gubmnt guaranteed deposits in the banks and in the process also guaranteed the bondholders of the banks. In Ireland, the gubmnt was able to fund the operation through increased taxes, spending cutbacks, and additional gubmnt bond issues. 

Cyprus doesn't have these options. The size of their bailout was about the equivalent of a full year's GDP for the country, and they simply could not raise taxes or cut spending enough to cover the bailout.

So they called on the IMF for help. And, no surprise, the IMF looked at the situation and saw no feasible way for the gubmnt to cover any loans the IMF might make to help them out. 

One option, for the Cypriot gubmnt to repudiate their debt, surely was considered. But debt repudiation would hurt the banks in the rest of the EU, and those banks and gubmnts likely lobbied the IMF to seek some other alternative. 

And that is when they settled on taxing deposits. This policy is horrendous. It is designed to steal wealth from large-depositor Russians who have tried to hide their money in Cyprus, but it will also hurt Cypriot businesses and people who have used the banks to save for (and plan for) their retirements, educations, etc.

My first reaction is "Since when did bondholders ever have a guarantee that their bonds would be repaid in full?" Ask the bondholders of pre-nationalized General Motors; ask bondholders of the Greek gubmnt. Why should bondholders of Cypriot gubmnt bonds or of Cypriot banks be protected from their inability or unwillingness to perform a fairly simple due diligence examination? A bond is not a guaranteed safe investment. Nor should it be.

My second reaction is that not only are Cypriots trying to drain their limits at ATMs, where total withdrawals until Tuesday are limited, but to the extent possible they will be using the internet and other options to prepay their credit card debts. I know that if I had $10K in the bank there, I'd try to put it on my paid up credit card balance and forego the interest income I might have earned in the bank to avoid the tax. But I don't know to what extent this is possible. 

In the end, I wonder if this will really happen. The parliamentary vote that was to have been taken today has been delayed until tomorrow. 

It was all started in the name of "protecting depositors" in banks that lost a lot of money several years ago. That sure seems ironic.

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Depositors burned, bondholders saved, a modern European bailout

Bailout Cuts Cyprus Bank Accounts, Withdrawals Barred

A look at Cyprus' decision to tax depositors

Cyprus parliament delays vote on bank deposits tax

The Cyprus precedent

The Use of Fossil Fuels and the GREENING of the Planet

 In this 18-minute video, Matt Ridley explains why and how the use of fossil fuels is contributing to the greening of the planet:

From Reason magazine (h/t JB):

Over the past three decades, our planet has gotten greener!

Even stranger, the greening of the planet in recent decades appears to be happening because of, not despite, our reliance on fossil fuels. While environmentalists often talk about how bad stuff like CO2 causes bad things to happen like global warming, it turns out that the plants aren't complaining.

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The Economic Impact of the World Skating Championships on London, Ontario(it's minimal or negative)

The residents of London were told early on that hosting the World Figure Skating Championships would draw 50,000 visitors to London, Ontario, this week and have a tremendous impact on the economy, injecting millions of dollars of spending.

I was skeptical from the start:

• As I have outlined in previous work, much of the extra spending is often diverted from other local spending and it leaks right back out of the economy (see this)
• The Bud (Budweiser Gardens, formerly the John Labatt Centre, the venue for the event) holds only 8 - 10K. Actually, according the LFPress, the actual capacity for figure skating is slightly under 7K, and even that number has not been reached for any events to date. From the London Free Press article titled "Thousands of tickets remain unsold for World Figure Skating Championships; Fans disguised as empty seats":

There hasn't been a sellout yet in the first three days of competition at the world championships, though Patrick Chan [EE: Chan is Canadian and a local fan favourite] and the men's skate came closest so far with 6,593 tickets sold.

Capacity at the arena has been set at 6,991 and the event is expected to come in at 85 percent over the week (including Monday and Tuesday practices at the Gardens).

There are 11 sessions, which means there were 73,601 total tickets available, and 62,197 [sic. had been sold(?)] as of Friday. Organizers believe the Saturday evening free dance showdown between hometown Olympic champions Tessa Virtue and Scott Moir and Meryl Davis and Charlie White of the United States will be sold out.

• Many of those seats are being filled by people within walking or driving distance; they come in for an event, watch it, and leave, not spending much while they are here. Many other seats are being filled by people who shelled out $1300 for a full event pass. Even adding in all the media and support staff, there is no way this event will have drawn 50K visitors to the city. Indeed, later projections were lowered to 30-35K, which I suspect is still a sizable overestimate.

As is often the case, there is considerable anecdotal evidence emerging on FaceBook that many downtown merchants are having less business this week because of the concerns from locals about parking and traffic congestion. Many traffic lanes are blocked around the venue, and parking at the venue itself has been taken over by media and other equipment trucks.

The major positive impact on the local economy is, as usual, for the local hotel, taxi, and restaurant trade. But the impact on the restaurants in the area was odd: because of anticipated parking problems and because of the congested streets in the downtown area, locals avoided eating in the downtown restaurants. When the events were on, the restaurants were nearly empty; only when there was a break between events, did many of the fans wandered out to one of the nearby restaurants. But those who were attending two events in succession didn't really have time to patronize some of the finer local places, and so they rushed over to the food stands in the local market to grab something fast. Or they ate at the food stands inside The Bud. From MetroNews,

Several local restaurateurs told Metro Thursday about unfulfilled expectations — that the 2013 World Figure Skating Championships had made little to no impact on business.

“I’ll be happy if we break even,” said Seve Sanfilippo, manager of The Rocks on King, a restaurant/bar located across the street from the Budweiser Gardens’ busiest entrance.

... Figure skating competitions of this magnitude demand frequent stoppages in order to resurface the ice. As well, in between events fans only have enough time to stretch their legs and quickly grab a bite to eat.

Rushing outside to get a food fix has been an uncommon occurrence. “People are saying, ‘This is great, we don’t have to leave,’” Moore [manager of Ovations, which runs the food concessions at The Bud] added.

[For more on the problems the event posed for downtown restaurants, see this; and for a slightly contrary assessment, see this.]

The overall net effect of hosting the World Figure Skating Championships in London will surely be small or negative and short-run. Further, the city spent millions of dollars on security and to spruce things up, adding street decorations, reconstructing a pedestrian area, moving the panhandlers out of the downtown core, rerouting buses, blocking traffic lanes, adding purple-coloured lights everywhere, and sponsoring a massive light show.

It still amazes me that taxpayers are willing to praise politicians who bring things like this to their cities. I truly doubt that the net impact was positive overall.

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Thousands of tickets remain unsold for World Figure Skating Championships in London

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Bless CBC-Bold and PJ Kwong! CBC's coverage of the World Ice Skating Championships

The Most Original Ice Dance... EVER

Molokai, Addendum

The morning of the day we left Molokai, I went back to Popahaku Beach, partly to linger, partly to hold onto the memories. 

And, of course, I couldn't leave without doing some stomp art in the sand. 

Our flights home took us via Chicago O'Hare, where it was snowing when we landed. It was a wet snow, and it didn't seem all THAT serious, but I guess it was. When we landed, we had a very smooth landing, but the plane seemed to slide sideways a bit. And once we landed, we had to join a queue just to get to our gate. Meanwhile, we got to watch the snow-removal teams of vehicles at work. I counted 12 of them in a row, ploughing and blowing the snow from the taxi strips.

Because of weather issues and mechanical issues with a plane ahead of us, we waited on the tarmac for nearly two hours before we could disembark. If our other plane was on time, we had 10 minutes to get to it. But the minute we got off the plane we checked the board and saw that our next flight (direct from Chicago to London, Ontario) was delayed an hour, so we relaxed a bit and found our way to the proper gate. 

It turned out that about every 15 - 20 minutes, the flight to London was delayed again, just a bit more, "awaiting inbound aircraft" which, it turned out, had never left London to get to Chicago.

During the wait, this sign really tickled me:

The rescheduled departure time was 4:15 CST; the flight was due to arrive in London at 4:24 EST (which is 3:24 CST). And the flight was expected to take an hour and 14 minutes. I assumed that meant we'd be traveling faster than the speed of light.

That flight was eventually cancelled. So we rescheduled for the later flight. Then 20 minutes before it was due to depart, it too was cancelled. So we tried to rebook. It turned out there was no way to get out of Chicago that night to London. Furthermore, every conceivable way of doing it the next day was completely booked up. We were going to have to spend two nights in Chicago.

So I called a number provided by the airline, and they automagically booked us into the Intercontinental Hotel at O'Hare for about $80/night. Ms. Eclectic and I looked at each other and agreed; I pronounced, "hurt me some more." The rack rate of the room we had was $500, and the currently listed internet rate is about $170/night. 

We relaxed. We drank. We ate. And we enjoyed ourselves in our corner room with a funky bathroom:

It sort of reminded us of the Old Dominion Hotel in the lower old village in Quebec City. 

Finally, after two nights, we boarded a flight from Chicago to Toronto, were pleasantly surprised to see our checked bags were with us, and from Toronto flew home. 

Overall, it was a pleasant, relaxing holiday, even with the flight cancellations in Chicago. 

Aloha!

 

Related articles

Molokai, Part I (of 11?)

Molokai, Part 2 (of 11)

Molokai, Part 3 (of 11); Hiking in the hills

Molokai, Part 4 (of 11); More hiking in the hills

Molokai, Part 5 (of 11); Still more hiking in the hills

Molokai, Part 6 (of 11); On the beach

Molokai, Part 7 (of 11); Sunsets, beaches, and abandonment

Molokai, Part 8 (of 11); 2.4-mile beach

Molokai, Part 9 (of 11); Some Island features

Molokai, Part 11 (of 11); Hiking north

Molokai, Part 11 (of 11); Hiking north

The last afternoon we were on Molokai, I decided to hike a few miles north of the complex to a beach (Kawakui Iki) that is generally even more isolated than the others. The walk meant going up and down a couple of hills, following a very rough dirt track that some people attempt with 4x4 vehicles, but that is pretty daunting.

You can see two things from the above photo and the two photos below.

1. These tracks are not user friendly. 
2. The kiawe trees are everywhere.

How tough is the track? tough enough that this happened and that the shell was left to deteriorate.

Above: My first view of the bay. Do you see any vehicle tracks here? Neither do I.

But if you stare intently at this next photo, of the beach, you can see a pickup truck parked over there, under the trees. I'm sure that wasn't a smooth ride getting there.

I love seeing these flowers growing out of the rocks near the beach:

The rocks around the beach were from several different types of geological formations. Some appeared to be sandstone (or something?), holding forth against the standard lava base of the island.

 

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Molokai, Part I (of 11?)

Molokai, Part 2 (of 11)

Molokai, Part 3 (of 11); Hiking in the hills

Molokai, Part 4 (of 11); More hiking in the hills

Molokai, Part 5 (of 11); Still more hiking in the hills

Molokai, Part 6 (of 11); On the beach

Molokai, Part 7 (of 11); Sunsets, beaches, and abandonment

Molokai, Part 8 (of 11); 2.4-mile beach

Molokai, Part 9 (of 11); Some Island features

Molokai, Part 10 (of 11); Some Environs

Molokai, Part 10 (of 11); Some Environs

Sunsets, sunrises. Both left us feeling grateful for the opportunity to be there, enjoying the splendour and colours. Here's a cloud, after the sun had set. We loved all the shades and colours.

Down the hill from the swimming pool and the abandoned bar/restaurant, the beach is very rocky. This particular clump of rocks intrigued me. It reminded me of the gap in the rock formations at the Gaspe or of some of the natural rock bridges that one can see lots of places. But it's a lot smaller than those.

In previous postings I've mentioned the abandoned hotel. It hasn't even been boarded up entirely, but many of the roofs look as if they are in need of repair, and there might be some serious leaking in some of the units. It was a large hotel complex. Here is just a portion of it:

All those buildings have been abandoned (though probably not abandoned legally). The part of the lawn that has clearly been tended to is on the northern edge of the condo complex.

Much of the neglected ground was once part of the fairways of the golf course that surrounded the complex. Quite frankly, Ms. Eclectic and I were just as happy to have no golfing there. It was more open, less crowded, safer, and quieter. But there's no doubt that the abandonment of the golf course (and hotel) had a serious negative impact on the resale values of the condos.

 

 

 

 

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Molokai, Part I (of 11?)

Molokai, Part 2 (of 11)

Molokai, Part 3 (of 11); Hiking in the hills

Molokai, Part 4 (of 11); More hiking in the hills

Molokai, Part 5 (of 11); Still more hiking in the hills

Molokai, Part 6 (of 11); On the beach

Molokai, Part 7 (of 11); Sunsets, beaches, and abandonment

Molokai, Part 8 (of 11); 2.4-mile beach

Molokai, Part 9 (of 11); Some Island features

Molokai, Part 9 (of 11); Some Island features

One morning, our friends drove us to Kalaupapa Lookout. From there, we could see the imposing steep cliffs. Also, down on the peninsula is the Kalaupapa National Historical Site, where the leprosy colony was established and where a succession of priests and nuns worked tirelessly, self-sacrificingly to ease the lives of the people who had been condemned to living there.

On one of the information signs, there was a cute little green beetle, about a half-centimetre in diameter, crawling along (again, I used the macro lens here).

That evening, our friends took us to a fund-raiser for a hula school. Apparently the hula began on Molokai (a source of pride for the island residents), and the dancers from this school perform all over the world.

It turned out that the people running the fund-raiser had no objection to people bringing their own wine, so two of us walked three blocks into downtown and bought some wine. My choice: Flip-Flop Merlot for $5.39. Fortunately we bought three bottles of wine, cuz we drank 'em all!

The next few photos are from that event. They're not very crisp, but they capture the essence of the show.

The opening dance:

Notice the dancers were wearing red and yellow. Most (but not all) of the costumes were based on these two colours, which were the royal colours of King Kamehameha. There is a cape of red and yellow feathers that belonged to the king in the Kamehameha museum in Honolulu. 

A recently written dance about the history of fishing:

And a dance about the extremely, wonderfully aromatic plumeria flower:

And finally, the Samoan fire dancers, always fun.

 

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Molokai, Part I (of 11?)

Molokai, Part 2 (of 11)

Molokai, Part 3 (of 11); Hiking in the hills

Molokai, Part 4 (of 11); More hiking in the hills

Molokai, Part 5 (of 11); Still more hiking in the hills

Molokai, Part 6 (of 11); On the beach

Molokai, Part 7 (of 11); Sunsets, beaches, and abandonment

Molokai, Part 8 (of 11); 2.4-mile beach

Molokai, Part 7 (of 11); Sunsets, beaches, and abandonment

One evening, as a few of us were standing around one of the communal barbecues, we started talking about the "green flash" that some people say they see at sunset. I took a lot of photos of this sunset, but I never saw anything green aside from the grass and palm leaves.

On one of our walks, we came to this isolated cove/bay. Absolute aloneness here, and not at all far from the condos. Someone told us this beach is where people come who want to bathe and sunbathe nude. None there when we were there, though.

Just after I posed for this next photo, a large wave broke and soaked me up to my calves. 

On the way back from that beach, we saw this Egret, walking across the patio of the abandoned bar. What an unusual place to have so much deteriorating real estate.

Another of our walks took us a bit south of the condo complex, past storage areas where things from the past have been left to deteriorate... old equipment from the hotel, bar, restaurant, golf club, etc. Amazing that nothing was done with it. Here are some old umbrella frames:

and a bunch of other stuff:

And, of course, the ever-present kiawe trees. I called this one "Ichobod Kiawe".

 

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Molokai, Part I (of 11?)

Molokai, Part 2 (of 11)

Molokai, Part 3 (of 11); Hiking in the hills

Molokai, Part 4 (of 11); More hiking in the hills

Molokai, Part 5 (of 11); Still more hiking in the hills

Molokai, Part 6 (of 11); On the beach

Molokai, Part 5 (of 11); Still more hiking in the hills

As I said before, I love the windswept openness of the hills everywhere I go. This scene reminds me so much of so many of the places I've loved walking.

Farther up in the hills, at one point I glanced in through the kiawe and saw this old truck.

The truck looks like an abandoned vehicle, but I'm not so sure. In Hawaii, vehicles are kept a looonnnnggg time, even those that look as if they belong at the junkyard. It makes sense, given the high shipping costs for new cars, that people would keep old ones on the road a long time.

As a less extreme example, our friends in Molokai share a 1984 Mercedes. There is duct tape around the moon roof to keep the water out, and the emblem has been replaced by a hand-fashioned set of shells.

On the way back down from the hills to the condo complex, I saw a man trimming a palm tree. Some of the palms look pretty shaggy if the dead fronds aren't trimmed.

And here's the condo we stayed in. We were in the upper unit on the near corner. It was very comfortable and very well-supplied.

Next: The Beach

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Molokai, Part I (of 11?)

Molokai, Part 2 (of 11)

Molokai, Part 3 (of 11); Hiking in the hills

Molokai, Part 4 (of 11); More hiking in the hills

Molokai, Part 4 (of 11); More hiking in the hills

As I said before, I absolutely love windswept openness. And the west end of Molokai has LOTS of it.

The short, scrubby trees you see in the above two photos are kiawe. More about them later.

The dirt on most Hawaiian islands is red, presumably from the iron in the magma and lava (though I'm not sure). We all remember the red mud we encountered many years ago when our family climbed Olomana on Oahu, and it is abundant here, too. The dust is red, too, and it gets on everything, including inside the condo and on the roadside guardrails.

There were a number of imports to the islands that didn't work out very well. The Japanese emperor donated some small deer. These have thrived on Molokai, but during dry periods they go down into the condo complex, looking for edible vegetation. 

Another import was the mongoose. Reportedly Mongeese (?) were brought to the islands to hunt the rats, but that didn't work out very well because they are active at different times of the night and day. But the mongoose holes can be serious and dangerous.

A third import, and one that is really horrid now, was the kiawe tree. I'm told it was originally imported to be raised as a source of firewood. And that might have been successful in the days when wood was the only source of carbon fuel. But the trees have spread and have nasty thorns. Several times I had thorns from downed twigs or branches stick into my shoes or sandals (fortunately, they didn't go through, but they certainly do go through flip-flops). Nevertheless, kiawe are beautiful, gnarly trees.

 

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Molokai, Part I (of 11?)

Molokai, Part 2 (of 11)

Molokai, Part 3 (of 11); Hiking in the hills

Molokai, Part 3 (of 11); Hiking in the hills

One morning, I decided to take a loop walk up into the hills overlooking the ocean. Overall it was only about 5 miles with an elevation change of maybe 500m. As I left the condo area, I took these photos of some of the flower hedges.

The condos in the above photo are quite a distance from the ocean and are quite different from the one we stayed in. 

Later, I passed a number of trees with flowers like this one, a bit smaller than a golf ball.

Most of the western half of Molokai was (is still?) owned by "The Ranch". At one point, the Ranch decided to try to develop the west by putting in serviced lots (with underground provision of water, sewers, electricity, etc.) for high-end resort homes. They never sold many of the lots, and the hills remain a type of windswept emptiness (which reminded me of the same wonderful feelings I had when walking on the South Downs, Yorkshire Dales, or Saskatchewan coulees). Meanwhile the signs of attempted development remain. 

A depreciating sign for Kaiaka Road:

Part of the development included putting fire hydrants all along the roads. There are very often no homes or other places to be protected by all the fire hydrants, but I gather they come in handy for fighting brush fires.

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Molokai, Part 2 (of 11)

The condo we rented for the week was near the oceanfront, with a gorgeous view of the ocean. 

And the morning sunrises made attractive pastel patterns in the sky.

On really clear days, it is possible to see Oahu across this channel. And every once in awhile we saw whale spouts out there. At one time there had been a splendid golf course and an upscale hotel here, too, but for reasons I never fully understood, those things changed hands a couple of times and were abandoned. That's the former 9th (closest) and 1st fairways between us and the ocean.

Between our condo and the shore was something that reminded us of our recent stomp art. 

At first I thought those were hunks of coral, carefully arranged. It turns out there is very little coral in this part of Molokai. Those are coconuts painted white. I guess it has been there for a few years.

During the week we were there (Kaluakoi), life was very calm. There's almost a kind of natural selection process at work. It turns out that lots of seniors like a quiet, relaxed holiday. We met a few people at the community bbq, we spent time with our friends, and overall it was a pleasant stay.

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Molokai, Part I (of 11?)

Molokai, Part 1 (of 11)

In 1986-87, I was on sabbatical at The University of Hawaii, where I did research and taught. While there, I read about but never visited the island of Molokai. That island had a reputation for having had an isolated sanctuary/colony for sufferers of leprosy, but other than that, the general impression was that Molokai was not very exciting or even interesting.

Last fall our friends were telling us about how they and some other people we know spend months, every year, on Molokai. I was surprised and asked them about what the attraction was. They told us that where they spend their time is in a condo complex on the west coast of the island. It is isolated, relaxed, peaceful, calm, and it has wonderful views of sunsets.

We were later told that Molokai has NO stoplights, NO elevators, NO escalators, and no buildings taller than a moderate-sized palm tree. The nearest grocery store to the condo complex is 21 miles away. These facts capture an important aspect of the island. They are proud of their slow-paced lifestyle, and they fiercely defend it.

When our friends suggested we should visit them, we hesitated, partly due to the expense and partly because I'm involved in several shows in London. Fitting a trip in between shows looked possible, though, so I conferred with the director/producer of Cabaret in which I have a couple of minor roles (March 21-31, McManus Theatre, London Ontario), and obtained approval to miss rehearsals for the week we would be gone.

It's a long flight. It could be uncomfortable being cooped up for 9 hours, and we're old. So we booked first-class tickets. The flight from Chicago's O'Hare to Honolulu was on a United Boeing 777. I was surprised at how poorly equipt it was in the first class section: no plug-ins for recharging phones or laptops, no seat-back screens for watching movies, the red wine they served was ice cold, limited music selection. But there was one amazing redeeming feature: serviettes (napkins) with a buttonhole in the corner. 

I had seen these a number of years ago on a flight, and over the past few years I've sewn buttonholes into many of our cloth serviettes here at home. Here is why:

Serviettes with buttonholes are SO sensible, I'm surprised restaurants don't provide them. 

Our friends greeted us and took photos as we disembarked from the plane. 

My older son, David Ricardo Palmer, wondered whether we'd flown Islay airlines and had gone to Islay (home of several of his and my favourite scotch distilleries). Nope. That was Island Air.

Eliminating Pennies: Is the US Next?

Thanks in large measure to my efforts*, Canada is now in the process of eliminating the penny. It's an odd feeling when a store rounds the cash price up or down, but eventually we will all get used to it. 

Now there are increasing questions about whether the US will also eliminate the penny. They should:

• it's a nuisance
• it won't buy anything
• it costs more to make than it's worth
• add in the distribution costs, and it involves massive negative seignorage
• eliminating it would likely apply only for cash transactions, not credit or debit card transactions
• it would apply only to the total bill, after taxes, and not to individual prices
• with rounding both ways, it would not cause prices to rise
• competition keeps merchants from only rounding up
• it has been an unmitigated success in both Australia and New Zealand

This article in The Economist has the right idea, but it looks as if the lobbyists there will fight penny elimination successfully a bit longer.

Penny lovers and zinc-industry lobbyists counter that the coin’s demise would cost consumers, as merchants would round their prices up to the nearest nickel. But some economists disagree, suggesting that shop keepers might well round down in order to avoid moving from a price of, say, $9.99 to $10. Americans anyway seem willing to accept a fee for penny removal, as evidenced by the self-imposed cost of leaving them idle and the success of coin-counting machines, which take a cut when turning them into bills.

Other countries have eliminated low-value coins with less-than-dire results, and indeed, so has America. In 1857 it ditched the half-cent, which was then worth nearly as much in real terms as today’s dime. This has led some to suggest killing the nickel, which costs about ten cents to make, as well as the penny.

*Well, maybe not "in large measure". Actually my writings were both advocacy and predictive. I was, indeed, advocating the elimination of the penny, but at the same time I was arguing/predicting that we (in Canada) would eventually get rid of it regardless of whether my arguments carried any weight.

The same thing holds true for the US. It will happen. It's only a matter of time, depending in part on the strength of the lobbyists opposing the move and depending in part on the clarity of the arguments favouring the move.

Economic Inputs also called "Factors of Production"

In economics courses, we often talk about the inputs into the production process. I don't know why, but we call them "factors of production" when "inputs" seems just as good to me.

We lump the inputs into four categories: labour, capital, natural resources, and entrepreneurship. Of course there are varying subcategories of each, and we recognize that much labour can be thought of as "human capital" and that capital theory also helps us understand the utilization of natural resources. But trying to explain "entrepreneurship" is not always easy. 

Here's a great cartoon that might help:

There's some labour here, also some capital and some natural resources. But without innovative problem solving, those other things aren't worth nearly so much.

Global Warming: It is NOT Settled Science

Long-time readers of EclectEcon know that I am what is called a Global-Warming Skeptic. Check the links here, for example.

I'm not a denier; I'm just not sure. For example, when I look at how far the Athabasca Glacier has receded, it is impossible to deny that at in some parts of the world average temperatures seem to have risen. 

At the same time, I know there are parts of the world where ice continues to build up. And the year-to-year variation in temperatures is so big that discerning longer-term trends and cycles is quite difficult (sounds like economics!). Furthermore, the temperature evidence for so many years was being taken from weather stations that were located near expanding cities where temperatures tend to be higher even if global temperatures are not rising.

But anytime I would express skepticism, or anytime I would suggest maybe the costs due to global warming might be much less than the costs of trying to prevent it, I'd be met with assertions that "it is settled science."

It isn't, as this survey of earth scientists reveals [h/t Jack].

Only 36 percent of geoscientists and engineers believe that humans are creating a global warming crisis, according to a survey reported in the peer-reviewed Organization Studies. By contrast, a strong majority of the 1,077 respondents believe that nature is the primary cause of recent global warming and/or that future global warming will not be a very serious problem.

The survey results show geoscientists (also known as earth scientists) and engineers hold similar views as meteorologists. Two recent surveys of meteorologists (summarized here and here) revealed similar skepticism of alarmist global warming claims.

And people claim that economists can't agree on anything! hunh.

Related articles

More on Global Warming

More on the IPCC's Latest Leaked Document on Global Warming

Peer-Reviewed Survey Finds Majority Of Scientists Skeptical Of Global Warming Crisis

Money, Politics and the Science of Global Warming

Alarmists Change the Data to Support Global Warming Claims

I Smell Shortages, Lineups, Hoarding, Etc.

News like this is so depressing. Why won't people learn from experience (if not from economists)?

A group representing two-thirds of Argentina's supermarkets agreed to keep prices steady until the first of April.

The move comes days after the International Monetary Fund (IMF) censured Argentina for issuing inaccurate economic data.

The government says inflation is below 11% but economists say it is double.

Analysts have accused Argentina specifically of understating the rate of inflation since 2007 in order to keep interest rate payments on its debt low, and to flatter the political regime.

Some economists think the annual inflation rate could rise as high as 30% this year.

The supermarket agreement covers every item in all of the nation's largest chains.

They include Walmart, Carrefour, Coto, Jumbo and Disco.

Argentina's commerce ministry has asked consumers to monitor prices in the chains.

Next up: watch for cries about dirty speculators, calls to shoot hoarders, and extensive allegations about black markets and cronyism. There's a perfect model in Venezuela.

And seriously, the only way to deal with rampant inflation is to reduce the rate of growth of the money supply. If the gubmnt is printing money to fund its deficits, then deficit reduction will be necessary too.

Update: For more see this from Forbes.

Related articles

Argentina Freezes Supermarket Prices Amid Spiralling Inflation

Argentina freezes prices to break inflation spiral

Argentina pegs supermarket prices

Argentina freezes prices to break inflation spiral

Big Gubmnt and Cronyism, the case of electric cars

Argentine Markets Freeze Prices for 60-Days Amid 26% Inflation - Bloomberg

The Economics of Reducing Search Costs: the importance of network effects

A dating site for conservatives.

I have some conservative friends who seem to have found pretty good matches on regular dating sites. Unless lots of searchers lie about their political preferences, I see no reason why political views (weighted by their importance) couldn't be a part of most internet dating profiles. I expect they are, actually. So is location. So why the attempt to develop a unique Canadian site?

And that question highlights a problem with developing any new dating site --A big problem for those who are actively in the market is that the market seems a bit thin so far on this Canadian site [h/t Jack]:

As of January 30, the site’s Canadian offerings were almost non-existent, with zero men and only two women; a 47-year-old woman in Oshawa, Ont. looking for a husband and a “very busy person” from Antigonish, Nova Scotia.

A larger network means a higher probability of a better match. Hence all the ads for dating sites, trying to increase the value of joining the sites.

Apple, Why Didn't You Listen to Me (and many others!)?

The price of Apple's stock is falling. They're losing market share to Samsung. We all know why: screen size. As I argued several years ago, the iPhone was great for everything, but I'd prefer something a bit bigger so that reading would be easier (e.g. see this). I figured I wouldn't even be interested in an iPad if I had a bigger screen on an iPhone. 

So when the iPhone 5 came out just a bit longer but no wider than the iPhone 4, I gave up waiting and switched to a Samsung Note2. I am not entirely thrilled with the Note2, as I've said before: Android is difficult for me to adjust to, and the Note2 has buttons in the wrong places. I like that it takes micro SD cards and has a replaceable battery, and I especially like the big screen. And if Apple comes out with an iPhone 6 the size of even a Samsung Galaxy S3, I'll probably switch back. But preliminary rumours suggest they are moving in a different direction. 

Meanwhile people are abandoning Apple in droves. From the link [ht MA]

"We think Apple is losing the screen-size wars," Mr Misek said, noting that demand was moving away from the iPhone's 3.5-inch and 4-inch screens to screens of 5 inches offered by rivals such as Samsung Electronics.

Makes sense to me.

Addendum: I meant to add that as I had expected, now that I have my Note2, I do indeed rarely use my iPad.

 

Related articles

My Adjustment from iPhones to Samsung's Note2 -- not so smooth

iPhone 5S and iPhone 6: Release date, pricing and specs rumors

Bigger iPhone Screens Coming? Not Yet

Prima Facie Evidence of a Lack of Competition:the case of e-books

Have you noticed how expensive e-books are? There might be a good reason, according to the US Department of Justice: collusion to fix prices (via MA).

Penguin has settled with the Department of Justice in the e-book price-fixing case brought against Apple and five publishers this year. Three of the other publishers involved: Hachette, Simon & Schuster and HarperCollins — have already agreed to settle.

Penguin and Macmillan were holdouts, insisting that the case had no grounds. "We did not collude," said Macmillan CEO John Sargent in April, when the DOJ brought its case.

They may not have colluded, and unless there is "smoking gun"-type evidence, we may never know for sure. However we do know from all our theoretical models that if the e-book industry were competitive, prices would tend to reflect the costs of publication. But when e-book prices exceed the prices of paperbacks for the same titles, and when paperbacks are more costly to produce, it's an indication that competition is not driving prices down to even approximately reflect publication costs. 

Higher prices for e-books probably reflects price discrimination across different consumers with different price elasticities of demand. But that type of price discrimination can occur only when there is a lack of competition.

Big Gubmnt and Cronyism, the case of electric cars

One reason so many people oppose big gubmnt is that politicians, like everyone else, respond to incentives. This means that many politicians, or at least enough that it's a problem, are susceptible to some sort of influence.

Electric cars might well be one of many examples*. From the Washington Post:

An electric car start-up and its sister company sued the Energy Department on Thursday, claiming Secretary Steven Chu and his agency awarded money to politically favored firms and strung along their firms and others in a “fixed” race for federal funds.

In addition to complaints of cronyism, XP Vehicles and Limnia said they have evidence suggesting the Energy Department improperly shared their patented technology with competing companies that won federal funding.  

*Other examples might include bailing out the banks and sacrificing bondholders to bolster labour union support in the auto industry.

An Extra Benefit of Snow-Stomp Art

It stays there after the rest of the snow melts!

The champagne glasses have disappeared, but everything else is there. It even stands out a bit.

The temperature yesterday reached +5C [recall that C = Canadian, F = Foreign] and is forecast to reach +double digits over the weekend. I'm not sure how long the bottle can last under those conditions!

The Bank of Canada Should Bring Me to Ottawa for This

In February, the Bank of Canada will stop distributing pennies in Canada. Given my history and notoriety in recommending that Canada abandon the penny, I think they should have a special ceremony and let me send the last penny out into circulation.

I mean, how often is it that someone from UWO is mentioned in a University of Trono publication like this:

The Bank of Canada has announced it will phase out the penny. Why now?
John Palmer, an economist at Western University, has been telling the Bank of Canada to get rid of the penny for the past 30 years. Pennies are a nuisance. How many people nowadays would stop to pick up a penny off the ground? A century ago, you could pay for a chocolate bar with two or three pennies; now they have no real purchasing power. And they cost the bank 60 per cent more to produce than they’re worth. The question is why the bank took so long! The answer is that it probably just came down to inertia. In any institution, there’s always risk with change.

Actually, it's been only about 23 years or so, but who's counting?

 

Canadian Humour

Shortly after I moved to Canada in 1971, someone from the US asked me, "How big a city IS Canada?"

A couple of years later, I was awarded a prize for having come the farthest to an event because I was from Canada (I'd traveled maybe 900 miles) when there was someone else there from Hawaii (what? a couple of thousand miles?).

Canadians, in general, know a lot more about the US than people from there know about Canada. When I first took my job in Canada, I read a short history book about Canada only to be aghast that

• maybe the US didn't win the War of 1812; 
• after reading that book, I knew a LOT more Canadian history than many Canadian residents.

What all this is leading up to is this article in the Washington Post about Canadian humour and the fuller article in Vanity Fair mentioned there.

From the WaPo piece:

There’s an American joke that Canada is like a loft apartment over the world’s greatest party. It turns out, judging from McCall’s history of Canadian humor, that they might all be chuckling at us up there. The unique national brand of humor is, he writes, a response to — and way of coping with — the oppressive weight of American culture.

Regardless of whether this perception of culture is correct, it is widely held, especially by producers of cultural events in Canada who resent the competition in Canada from the US. But Canadians have been wildly successful in the US entertainment business. The article lists many Canadian comedians:

The list of famous Canadian comedians is long – really long: John Candy, Dan Aykroyd, Phil Hartman (all of whom, like many others, came through the famous Toronto branch of Chicago’s Second City improv club), Leslie Nielsen, Jim Carrey, Rick Moranis, Seth Rogen, Eugene Levy, Samantha Bee, Mike Myers, Mort Sahl, and on and on.

and the list includes only comedians. Canadians are quite proud of other entertainers who also got their start in Canada.

It makes sense that Canadian entertainers would head south... that's where the big market is.

Scrooge and Competitive Markets

Do you think Ebeneezer Scrooge had monopsony power over Bob Cratchett?

Do you think Bob Cratchett was forced to work for Scrooge? 

Do you think Bob Cratchett had any other options available to him.... in London?

If you think Cratchett probably had other options available, why the heck did he keep working for Scrooge if Scrooge was such a .... Scrooge? 

And if Scrooge was paying Cratchett just what Cratchett was worth on the market, what any other employer would pay, why did the ghosts visit Scrooge and warn him to reform? Do you think those ghosts visited all the other potential employers of Cratchett who didn't offer him any better job than Scrooge did? 

If Scrooge was paying Cratchett the market wage, I'm not persuaded he was such a bad guy. 

And if the business mores of the time made it impossible or extremely costly for Cratchett to shop around for a better job, then maybe we should be grateful for increased labour market competition and job mobility, not for Christmas ghosts. 

Anyway, Merry Christmas, and "God bless us, everyone."

Update: Steve Landsburg defends Scrooge from a different perspective here.