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| Last Updated: Aug 15th, 2008 - 11:26:43 |
Newsletters
:
2006 Newsletters
:
11 August 2006
Thought for the Day
All people are created different.
Our ancestors created civilisation that we might be equal before the law.
New Zealanders however are not equal before the law. What has gone wrong?
Does this institutional inadequacy impede our economic growth?
Aug 11, 2006, 11:22
Newsletters
:
2006 Newsletters
:
11 August 2006
The Sir Ron Trotter 2006 Lecture
On Tuesday evening the 8th of August a number of Foundation for Economic Growth members attended the Sir Ron Trotter 2006 lecture delivered by Professor Peter Boettke of the George Mason University in Fairfax, Virginia. Boettke is an economist from the Austrian school which has included such famous figures such as the Nobel laureates F.A Hayek and James Buchanan. The Austrian school is noted for its emphasis on free markets, constitutionalism and entrepreneurship.
Boettke's speech was entitled "The Battle of Ideas: Economics and the Struggle for a Better World". The major theme of the speech was to highlight how the Classical economists, including Adam Smith and David Hume had essentially “got it right” and how we have deviated from this path especially in the 20th century under the malign influence of Keynesianism and Scientism (the attempt to treat economics as a “hard” science like chemistry and physics for example and how this led to the excessive emphasis on mathematical and statistical approaches to the discipline) and how these methodologies had reduced wealth by promoting the welfare state in the 20th century.
He did express some guarded optimism about the future. He stated that in the “battle of ideas”, the “old” ideas have made a strong comeback over the last 25 years in particular, but that the practical implementation of these ideas has not happened - at least not so far. In other words the ideas of Keynesianism aggregate demand (micro)management, welfarism and central planning still dominate much of the practical approach around the world.
He made a plea for economists to be “humble” in their policy advice noting the disasters wrought by treating economists as “saviours” and that their primary function should be, in the “lampooning” spirit of Bastiat as impartial advisor, to vigorously criticise policy errors.
My own understanding is that Keynesianism was taken much further in the second half of the 20th century than Keynes himself would have done. A point made by Hayek. Keynes’s main theme was that an economy could be “stuck” for long periods at a sub-optimal level (in terms of output and unemployment) and that government intervention in monetary or fiscal policy could, by stimulating aggregate demand, move the economy back to its equilibrium state. He noted quite specifically that when an economy reached its full employment level, the “classical” rules then applied. Many of the policy mistakes of the last 50 years have resulted from the “over” application of Keynes's theory. That is the natural tendency of humans to feel that if a little bit is good then a little bit more must be better!
We now understand that although markets can fail, so too can governments. The inability to achieve perfection does not therefore necessarily mean that government intervention is required.
Aug 9, 2006, 13:59
Newsletters
:
2006 Newsletters
:
11 August 2006
Working Out Who's Out of Work
One of the problems when the Government is responsible for producing statistics is the tendency to establish measures that put the Government in a good light. The USA government has now decided not to publish how much the (M3) money supply is increasing. Is this because the figure is embarrassing to them?
One of the statistics that has always been of concern to me is the unemployment rate. The way of measuring it seemed to be prone to results that were not indicative of the real situation. This is fine if you just want to have some "feel good" numbers to talk about but if we believe them and make policy decisions from these results we may end up in a bit of a pickle.
The Economist, in this article, has a look at this problem and the difference between the "official" unemployment rate and a realistic assessment is truly amazing.
Do we measure our unemployment rate the Swedish way?
Jul 10, 2006, 19:08
Newsletters
:
2006 Newsletters
:
11 August 2006
Gibraltar Tax Cuts
A snippet from a news item:
It's a good year to be a Gibraltarian. Chief Minister Peter Caruana has announced that the Rock's GDP per capita ranks 10th in the entire world.
As a "thank you" for this economic success, Caruana announced a series of tax breaks for residents, including ending the "occupational pension tax" after persons turn 60, reducing the top income tax rate by 3%, and eliminating the 20% tax on pension capital. Even though EU tax hounds are trying their best to sabotage the Rock as a tax haven, it's still home to a great many wealthy expatriates from Russia and around Europe. Gibraltar continues to resist EU efforts to force it to repeal its favorable corporate tax haven laws, but the Caruna's governmement is fighting this in court.
Jul 3, 2006, 12:13
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