Tyler Cowen at Marginal Revolution draws from Tom Palmer’s new book and comes up with 5 main categories of libertarians:

1. Cato-influenced (for lack of a better word).  There is an orthodox reading of what “being libertarian” means, defined by the troika of free markets, non-interventionism, and civil liberties.  It is based on individual rights but does not insist on anarchism.  A ruling principle is that libertarians should not endorse state interventions.  I read Palmer’s book as belonging to this tradition, broadly speaking.

2. Rothbardian anarchism.  Free-market protection agencies will replace government-as-we-know-it.  War is evil and the problems of anarchy pale in comparison.  David Friedman offered a more utilitarian-sounding version of this approach, shorn of Misesian influence.

3. Mises Institute nationalism.  Gold standard, a priori reasoning, monetary apocalypse, and suspicious of immigration because maybe private landowners would not have let those people into their living rooms.

4. Jeff Friedman and Critical Review: Everything is up for grabs, let’s be consequentialists and focus on the welfare state because that’s where the action is.  Marx is dead.  The case for some version of libertarianism ultimately rests upon voter ignorance and, dare I say it, voter irrationality.

5. “Hayek libertarianism.”  All or most of the great libertarian thinkers are ultimately compatible with each other and we have a big tent of all sorts of classical liberal ideas.  Hayek and Friedman are the chosen “public faces” of this approach.  “There’s a classical liberal tradition and classical liberal values and we can be fuzzy on a lot of other things.”

As good a distinction as any other I suspect – curious how people would define Australian Libertarians – if along similar lines, other ones etc.

(h/t Reason Magazine)

One of the loudest critics of liberal capitalism in Australia, Robert Manne, has blamed derivatives for the crisis. In this he is not alone. In America another prominent anti-capitalist crusader Richard Katz has also pointed the finger at “the explosion of unregulated derivatives in the United Stats and globally” building on the housing bubble.

This is the perfect enemy for the anti-capitalists because the cause of the problem was the financial market itself. Boo. Hiss.

But, like the “blame savings” thesis, the “blame derivatives” thesis fails to explain the main problem.

The idea is that the markets packaged bad home loans into new financial vehicles and these were widely traded around the world. Derivatives are a financial asset that gain their value by leveraging to real underlying asset. They enable people to shift risk to people who are most able or willing to accept the risk. They also allow people to take a more nuanced position in any market. With home loans, the original writers of the debt were able to sell the risk as a derivative, and as home loans have gone bad these derivative holders have faced losses.

But this answer fails to address the initial problem – which is the existence of the bad home loans in the first place. Derivatives don’t create the underlying asset. They are an add-on to any pre-existing asset. Further, derivatives don’t increase the risk or the loss. They simply allow the risk to be traded.

If it was the existence of derivatives that is the main problem, then all derivatives should have the problem and not only those derivatives related to home loans. But that isn’t the case.

True, people wrongly assessed the riskiness of the property-based derivatives. But that isn’t the fault of the derivatives. The real questions that need to be answered are (1) why did people over-invest in property; and (2) why did people incorrectly assess the risk of those loans? The existence of derivatives doesn’t answer either of these questions and so leaves us none the wiser.

(Previous articles in this series are about Lehmann collapse, greed & the savings glut).

Last week I argued in the Canberra Times against the minimum wage, pointing out that last years minimum wage increase lead to no higher disposable income and 16,000 jobs lost (or not created). I went on to write:

The commission will decide next month by how much it will increase the minimum wage. The economic situation facing the commissioners is very different to last year, but the basic trade-off remains the same. Whatever gains it gives to workers will be substantially reduced through tax and inflation, and will lead to relatively lower employment.

Instead of concentrating on minimum wage, the government could use the tax and transfer system. Tax cuts and transfer payments directly help workers and they don’t destroy jobs.

Today we have the good news that the Fair Pay Commission has decided to freeze the minimum wage at $14.31/hour, thereby giving low-skilled workers a greater chance to find and keep work. In their summary of the decision the Commission explains that:

In the current environment, the ability of employers to offer sufficient work has been curtailed and there is a heightened risk that an increase in regulated minimum wages would reduce employment and working hours

Excellent. Thank you Ian Harper for putting the interests of low-skilled workers ahead of the moral posturing of the latte left. The Commission goes on to note that the next minimum wage review will be done by Rudd’s new “Fair Work Australia”. We can only hope that they will continue the current pro-job approach.

There is a theory running around some quarters that the financial crisis and world recession were caused by too much savings from countries like China and Japan. The theory runs that this excessive savings had to go somewhere so it wound up in a property boom in America, which eventually was unwound, giving us the crisis.

But this diagnosis totally fails to explain the main problem.

First, there is nothing bad about having lots of savings in the world economy. A higher level of savings will lead to lower interest rates and allow more marginal businesses to raise capital for their marginal projects. For example, if the world interest rate is 5% then only businesses with an expected return above 5% should get finance. But if the world interest rate drops to 3% then all of those business plans with an expected return between 3% and 5% should now be able to access finance.

None of this is a problem.

So to complain about too much savings still leaves the main question unanswered – why did the money go to the wrong place? There is nothing in inherent about Chinese savings that makes that money want to go into an American property boom. It could have gone anywhere. So the “too much savings” thesis fails to answer the main question.

It is true that low interest rates exacerbated the housing bubble. Once the money started flowing the wrong way, when you turn up the tap you get more money flowing the wrong way. But even then, it is unfair to blame savers for that. You need savers in financial markets and there is no objective right or wrong level of savings. The right amount is whatever is good for the savers, and the borrowers will adjust to that.

If we want to blame anybody for “turning up the tap” then the blame rests with the US federal reserve. Between 2003 and 2007 they kept monetary policy too loose and interest rates too low, allowing inflation to build up in the economy. At least the Chinese savings was real money. The extra money pumped in by the federal reserve was never sustainable and would always require a correction.

(For the previous articles in this series, see here and here)

Here’s an eye opener………

I read a paper linked  by ClimateAudit.com which describes a finding by a statistician, David Stockwell about a widely circulated paper suggesting AGW was getting worse. Stockwell strongly asserts that the paper applied “wrong” statistical smoothing in a non linear data series.

What’s the problem with that?

Well, Garnaut used that paper called Rahmstorf  et al (2007) to basically anchor  his entire economic analysis. So it could very well be that Garnaut’s advice to the government was actually premised on wrong statistical evidence that AGW was getting worse than originally thought, particularly as it compares to what the IPCC said.

Abstract from the Stockwell paper says:

The non-linear trend in Rahmstorf et al. [2007] is updated with recent global temperature data.  The evidence does not support the basis for their claim that the sensitivity of the climate system has been underestimated.

And here is what Stockwell says about Garnaut.

Despite the lapse in statistical rigor, Rahmstorf et al. [2007] has been widely cited in support of more urgent action on emission controls [e.g. Garnaut 2008].

So from what I can gather Garnaut moved away from the science applied in the IPCC report to a much more gloomier report and based his economic study on a paper, which has now been possibly found to be of dubious quality and reliability. Further, if is found to be dubious is there a legitimate claim for a refund?

See here for the paper. Sourced from ClimateAudit.

Here’s my question: are we going to see Garnaut and the Government come back and revise their strategy and economic analysis if the paper is found to be a unreliable?

Who is David Stockwell?

After receiving his Ph.D. degree in Ecosystem Dynamics from the Australian National University in 1992, Dr Stockwell worked as a consultant until moving to the San Diego Supercomputer Center at University of California San Diego in 1997.

[Formatting edited 06/07/09]

The government has reduced income taxes as at 1 July. But government inflation has eaten into our after tax spending power and they haven’t even handed back this bracket creep. Clearly our rate of tax is still way too high. If we removed the last three rows in the tax table below then we would have a half way respectable tax system. Ideally we would remove the last four rows from the table.

It is a sad fact that the state of liberty in Australia is in a rather sorry shape. The size and scope of government is consistently increasing, our economic and social freedoms are shrinking, and there is no respite in sight. There can be no denying that freedom is on the retreat.

Yet why is this? Our think tanks are world-class. We have many believers of small government in state and federal parliaments (albeit somewhat hidden in the closet), and youth political organisations like the ALSF are completely onside. Why, by any objective standard, have we failed?

Rather than using excuses of political culture, and blaming external forces, I would suggest that we look squarely at ourselves as the reason. We need to take responsibility for our failings, and address them for the way forward. I believe that one of the fundamental reasons we have not succeeded is that we have failed to look at the battle for liberty in a strategic manner, and instead have approached things in a manner that can be described as ad hoc at best.

Allow me to explain. Think, if you will, of the promotion of liberty as analogous to the structure of production, and the way institutions fit together. For this example, I will use a simplified and bastardised version of Hayek’s model (apologies to puritans)!

The structure of production in a developed economy can rather easily be defined. First you have the initial stages, representing investments and businesses involved in the enhanced production of basic inputs – raw materials. The middle stages convert these raw materials into various types of products that add more value – intermediate and capital goods. The final stages take these, transform them, and package them as consumer goods.

This theory, I suggest, can be applied just as equally to the structure of social change, and, through that, to the institutions of social change and political battle. So. How would this work?

Firstly you have your raw materials – ideas. These are raw intellectual materials; abstract theories and concepts. These are generally removed from the average citizen, and abstract in nature. These then become converted into policy analysis and policy papers. Slightly more accessible perhaps, but still generally removed from your average layman. Then you have the third stage. Consumer goods. Policies are neatly packaged, simplified, and presented to the people. The proposals are translated in a way the citizenry can understand and act upon.

So, how does this translate into something a little more concrete and into an institutional setting. Firstly, we have the raw ideas – these come from the universities. A great example would be the work in the University of Chicago in the 1960’s and 70’s. These are then developed into policy proposals by think tanks – to continue the example, Cato and others in the 1980’s. Then, we have the ‘implementation phase’ where grassroots advocacy and activist organisations fight in the trenches to convince the public, and then lobby the politicians – the National Taxpayers Union, Americans for Tax Reform etc. After all, it was this combination that ensured the great deregulations here, leading to  significant increases in economic growth and prosperity.

Success is achieved in this model when all organizations work together in a holistic manner and are equal in strength. It is only when all three components are in play and institutions in all three stages are health that we can actually achieve true policy change.  It is essential that all three stages are strong and functioning to maximise output in the final stage.

Now look at Australia. We certainly have the raw ideas – whether it be through the work of those in our Academy (eg Sinclair Davidson and Alex Robson) or that we steal it from abroad, whilst outnumbered by the left, we certainly are represented here. Then it comes to the middle stage, the think tanks. The CIS and the IPA are without doubt world class, and produce brilliant policy papers and proposals. Now we come to the implementation stage. And….. um… hmm…

There is nothing.

This, I suggest, is the fundamental problem we face. We have no organisations dedicated to free market ideas that are focused to a)packaging the message in a nice simple format for the average Australian to be able to digest and b)lobbying politicians to adopt this. None. The left have them. Social conservatives have them. Even crazy insane people have them. But not us. Granted, the IPA has recently started moving in that direction, which is great, but ultimately that isn’t their comparative advantage. What we need in Australia is a genuine grassroots free market advocacy organisaiton.

For those of you who don’t know me personally, I’m currently in the US learning the skills to do just that. As part of that, I’m participating in the Koch Associate Program in conjunction with my employment at Americans For Tax Reform; whilst many don’t know the name Koch, it is not only the largest private company in the world (revenue exceeding $100 billion USD a year), it also funds pretty much the entire small government movement. At the risk of turning this into blatant self promotion, the year long program’s aims are “ to identify up-and-coming leaders and entrepreneurs interested in liberty and help them develop the knowledge, skills, and experience necessary for careers with market-oriented think tanks, policy institutes, and other non-profit organizations”. In just two weeks I have learned more on how to effect change than I have in many years at home (and will try to go into concepts of the Science of Liberty and Market Based Management in a later post). So my grand plan down the track is to set something up like this back in Australia (hence the self-serving nature of this post!)

I know many in Australia doubt the efficacy and practicality of grassroots organisations as opposed to think tanks (I had a debate with the doyen of the ALS, Mr. Humphreys, on this very matter a few weeks ago). However I am convinced that until we set up a vibrant grassroots advocacy movement – that actually works – to promote the free market back at home, we are doomed to continue the failures of the past.

For us to succeed, we must step down from the ivory towers of intellectualism, we must tear ourselves away from online debates, and we must get into the trenches are really start to fight. Only then can we really create change.

(Note: This post was based on From Ideas to Action: The Roles of Universities, Think Tanks, and Activist Groups by Richard H. Fink. Whilst my desire to set up a free market grassroots advocacy organisation in Australia has been around for years, this specific model and argument is completely taken from Richard Fink and the Charles G. Koch Charitable Foundation and I can claim no credit for it whatsoever)

Cross-posted at my personal blog.

The problem with censorship is **** **** ****

For anyone who has been in a coma over the last few weeks, there is some political upset in Iran.

Some Muslims pretended to set up a democratic government. Some Muslims objected to the farce and started to protest in the streets. Some other Muslims didn’t like the protests, and so started shooting them. Or maybe it was the first bunch. Or something.

This of course is markedly different to every other upset in the Middle East. And before you all say “of course it’s different – this is one is a struggle between freedom and oppresion, between good and evil”, well think again.

Actually it’s just different because of cell phones. Iran is a wealthy country (compared to most of the other poverty stricken Islamic cess-pits in the world), and protestors and passers-by have cheapo cell phones, which do two interesting things which conventional phones don’t.

Firstly, they do texting, so written reports of bloodshed and oppression can be thumbed out in glorious 160 character sound-bytes (er .. I mean text bytes). Secondly, and more importantly, they have cheapo video cameras in them. Video cameras which can actually record the bloodshed in even more glorious (if low resolution) color.

Humanitarians all over the world were outraged by the youtube video of the murder of a pretty young girl called ‘Neda’, shot through the chest by government forces, and bleeding out of her mouth and nose as she died on the street.

Then we learned that the Iranian government was using technology supplied by Nokia and Siemens to detect ’subversive activity’ on the internet, and the cell phone network. And they used it to censor data and shut down the protests. Naughty Nokia and Siemens.

Now Slashdot reports that two US senators (Schumer and Graham) want to punish Nokia and Siemens for providing that technology. Apparently supplying governments with the technology to restrict internet access is an evil thing to do.

Funny thing is, there are many governments with that this kind of technology. Including the US, and including Australia.

In fact Uncle Kevin is part way through an internet filtering trial which would stop us mere citizens from accessing ‘unwanted’ material (so ‘unwanted’, apparently that we wouldn’t want to access it anyway).

Are they willing to punish multinationals for selling that technology to Australia as well – or just to Axes of Evil?

Selling internet censorship technology must be only evil if it it is sold to bad governments, not to good governments. Because we all know that the likes of Uncle Kev would never abuse their power.

Remember: Other governments are evil, but YOUR government only wants what’s good for you.

Occasionally, there are news stories that at first sight seem  so ridiculous, that on first impressions you just laugh. But then, on closer inspection, they send chills down your spine and really make you wonder, just how far can the state now go. What, if anything, is left sacred.

This is one of those stories.

At the end of April, Caroline Cartwright, a 48-year-old housewife from Wearside in the north east of England, was remanded in custody for having “excessively noisy sex.” The cops took her in after neighbors complained of hearing her “shouting and groaning” and her “bed banging against the wall of her home.” Cartwright has, quite reasonably, defended her inalienable right to be a howler: “I can’t stop making noise during sex. It’s unnatural to not make any noises and I don’t think that I am particularly loud.”

So how did Cartwright’s expressions of noisy joy become a police case, which later this month will be ruled on at Newcastle Crown Court, one of the biggest courts in the north of England?

Because, unbelievably, Cartwright had previously been served with an Anti-Social Behaviour Order (ASBO)—a civil order that is used to control the minutiae of British people’s behaviour—that forbade her from making “excessive noise during sex” anywhere in England.

That’s right, going even further than Orwell’s imagined authoritarian hellhole, where at least there was a wood or two where people could indulge their sexual impulses, the local authorities in Wearside made all of England a no-go zone for Cartwright’s noisy shenanigans. If she wanted to howl with abandon, she would have to nip over the border to Scotland or maybe catch a ferry to France. It was because she breached the conditions of her Anti-Social Behaviour Order, the civil ruling about how much noise she can make while making love in England, that Cartwright was arrested.

Welcome to 1984.

Read the full article at Reason Magazine.

Update: I should also probably add the following quote, in case you weren’t horrified enough: “The ASBO system has turned much of Britain into a curtain-twitching, neighbor-watching, noise-policing gang of spies. The relative ease with which one can apply to the authorities for an ASBO positively invites people to use the system to punish their foes or the irritants who live in their neighborhoods. ASBOs have been used to prevent young people in certain areas from wearing hoods or hats (they look “threatening”), to ban a middle-aged couple from playing gangsta rap (the expletives offended workers and children at a nearby kindergarten), and to prevent a 10-year-old boy from having contact with matches until he turns 16, after he was found to have started a fire.”