Our weekly roundup of links, events, and stories from the interwebs. Served cold, but appetising all the same.
Last week Malcolm Turnbull and Christopher Pyne released their National Innovation and Science Agenda. Darcy warned us that innovation is coming (whether we like it or not)—not as economically-informed innovation policy, but as wasteful spending. Judith Sloan made a similar point in The Australian: this isn’t innovation policy, it’s innovation satire (the upshot is Utopia should have plenty of new material now). And see Catallaxy Files for a hard-hitting summary of the package: “Entrepreneurs who can create new synonyms for agility will receive special tax deductions.”
The Institute for Public Affairs was all over this too: Mikayla Novak on picking winners at Freedom Watch; Chris Berg on getting out the way of innovation at The Drum; and John Roskam on how the biggest source of opposition to innovation is always government in the Financial Review. See also Michael Potter of the Centre for Independent Studies make the point in Business Spectator that “the use of innovation that is more important than the generation of innovation”—a point lost on the innovation planners in the government. (Incidentally, you can donate to the IPA’s 2015 Christmas Appeal here and to the CIS here.)
Speaking of the leading think tanks in Australia, here’s a list of the 50 most influential think tanks in the United States. In the long-running battle for libertarian think tank supremacy the Cato Institute has once more defeated the Mises Institute. There’s always next year, a priorists!
Deaton’s Economics Nobel Lecture
Angus Deaton delivered his Nobel Lecture and formally received the award last week at the Aula Magna, Stockholm University. His lecture ‘Measuring and understanding behavior, welfare, and poverty’ is below.
The Wall Street Journal has picked a notable quotable from the lecture—about the spread of consumption and wealth inequalities—which is quite good. But I really like this about migration:
The effects of migration on poverty reduction dwarf those of free trade. Migrants who succeed in moving from poor countries to rich countries become better off than they were at home, and their remittances help their families to do better at home. Remittances have very different effects than aid, and they can empower recipients to demand more from their government, improving governance rather than undermining it.
And this about the negative forces of aid:
The negative forces are always present; even in good environments, aid compromises institutions, it contaminates local politics, and it undermines democracy. If poverty and underdevelopment are primarily consequences of poor institutions, then by weakening those institutions or stunting their development, large aid flows do exactly the opposite of what they are intended to do. It is hardly surprising then that, in spite of the direct effects of aid that are often positive, the record of aid shows no evidence of any overall beneficial effect.
And this about bypassing government aid:
What about bypassing governments and giving aid directly to the poor? Certainly, the immediate effects are likely to be better, especially in countries where little government-to-government aid actually reaches the poor. And it would take an astonishingly small sum of money – about 15 US cents a day from each adult in the rich world – to bring everyone up to at least the destitution line of a dollar a day.
And this about letting nations develop their own institutions:
What surely ought to happen is what happened in the now-rich world, where countries developed in their own way, in their own time, under their own political and economic structures. No one gave them aid or tried to bribe them to adopt policies for their own good. What we need to do now is to make sure that we are not standing in the way of the now-poor countries doing what we have already done. We need to let poor people help themselves and get out of the way—or, more positively, stop doing things that are obstructing them.
(All from his book The Great Escape: Health, Wealth, and the Origins of Inequality.) You get the point. A richly deserved Nobel. For an Australian perspective, we can see much the same dynamic playing out in indigenous development policy. Migration is discouraged and actively disincentivised (and so less remittances), local institutions have been stunted by intervention, and indigenous nations have been obstructed from developing their own political and economics structures (like say, their own non-territorial state governments within the federation—but that is another post for another day).
Economics of migration
Speaking about migration, Benjamin Powell, Director of the Free Market Institute at Texas Tech University, has been making the case for The Economics of Immigration for quite some time now. Lately he’s set his sights on Trump. Why? Because the best social science studying the actual impact of immigration is at odds with popular fears:
Greater flows of immigration have the potential to substantially increase world income and reduce extreme poverty. Existing evidence indicates that immigration slightly enhances the wealth of natives born in destination countries while doing little to harm the job prospects or reduce the wages of the native-born population. Similarly, although a matter of debate, most credible scholarly estimates of the net fiscal impact of current migration find only small positive or negative impacts. Importantly, current generations of immigrants do not appear to be assimilating more slowly than prior waves.
He also gave a keynote at the dinner for the Society for the Development of Austrian Economics meeting (as the outgoing President) last month, where—funnily enough—he spoke about the Austrian economics of immigration. The main point: restrictions on immigration distort the human capital structure of the domestic economy, causing misalignment in labour markets and further malinvestments in human capital. Stop doing that, jurisdictional planners. We don’t like it.
If you want more, here’s Bryan Caplan making the case for open borders to a room of staunchly anti-immigration folk. Here’s Gary Becker proposing his famous (and now policy of the Australian Liberal Democratic Party) radical solution to the challenge of immigration. And for something different, here’s Ben again interviewing Ron Paul and talking about free market rock music, because why not?
Blockchains, Baltic Bitnations, and basic income
As reported on Meso Soup here and here, Jason, Darcy, and myself were at the Sydney Blockchain Workshop last week. This was one of the best conference-type events any of us have been to, seemingly with each session displaying a mind-bending application of blockchains or insight into their implications. Jason was particularly enamoured by the Plantoid—the android of plants—which he sees as the very future of the arts economy. Keynotes were given by Ethereum founder and the next <insert tech giant> Vitalik Buterin (‘Crypto 2.0: The state of the blockchain report’ slides here) and recent Democratic presidential dropout and law professor Lawrence Lessig (‘Deja vu all over again: Thinking through law and code, again’ slides here). I’ll endeavour to post up a recap of the conference later this week, but in the meantime see this from Cassie Findlay of the Recordkeeping Roundtable, and check out the #BlockchainSYD hashtag on Twitter. Here are a couple of stories from Australian media on the event too.
As it turned out Sydney was the perfect location for the Blockchain Workshop, because Bitcoin’s creator Satoshi Nakamoto is probably this unknown Australian genius, according to Wired. It didn’t take long for Australian police to raid his home—only a matter of hours after the story broke—apparently for something to do with taxation. Nobody really thinks this is Satoshi anymore, but it was the punchline du jour of the Bitcoin community (and at the workshop) for a little while.
Speaking of mind-bending blockchain applications, Bitnation, a collaborative platform for do-it-yourself governance, is partnering with the Baltic state of Estonia to offer public notary services to Estonian e-Residents. Regardless of where they live or do business, e-residents are able to notarise their marriages, birth certificates, business contracts, and much more on the blockchain. Coverage from Bitcoin Magazine here. Pretty neat, but it’s just the beginning for blockchain governance. In fact, Bitnation has already tested many similar pilots, including the world’s first blockchain marriage, world citizenship ID, birth certificate, and land title. Not to mention their refugee emergency response, which offers blockchain IDs and Bitcoin debit cards to refugees to assist with their migration to the EU and channel aid directly to recipients, bypassing states. (I’m sure Deaton would see the value in these!)
Also in the Baltic region, Finland is set to break new ground with a basic income experiment. The best explainer comes from Vox: the plan at this stage is to survey the existing literature, analyse past experiments, and design different models to test in Finland. If they were to scrap the existing welfare system and pay the same cash benefit to every citizen (regardless of eligibility criteria)—as per a true national universal basic income program—some estimates are that each Finn would be entitled to around 800 euros tax free each month at a total cost of about 50 billion euros per year. OK, but the crucial part is whether such a policy would replace the existing welfare system (probably an improvement) or be added on top of it (a terrible idea).
Business Insider did some back-of-the-envelope maths to calculate what a similar scheme might look like in the UK: total welfare spending of 251 billion pounds divided by an adult population of just under 50 million = basic income of 423 pounds per month (or 585 euros, just under the Finnish estimate). My very rough estimate for Australia: currently set to spend 190 billion on welfare divided by approximately 18 million adult citizens = basic income of $880 per month (or 420 pounds or 580 euros). So much the same as in Finland or the UK. But is it good policy? It’s worth noting that a basic income is very similar to a negative income tax (F.A. Hayek supported the former and Milton Friedman supported the latter). Australian economist John Humphreys has done the sums on what a “30/30” negative income tax would cost us here, but I’ll give the final word to Mikayla Novak (quoted in this piece at The Vocal):
In a perfect world, a basic income would certainly be superior to the existing welfare system, which is inordinately complex, keeps people in poverty traps as welfare interacts with progressive income taxes, and increasingly paternalises welfare recipients. The worry is that a basic income would, itself, evolve into its own complex system not dissimilar to what we have in place today.
Fatally conceited climate planners
The global climate change conference in Paris has delivered an ‘international accord’ which plans to distort the world’s economy away from fossil fuels and towards less efficient sources of energy, and ultimately slow the pace of global warming. Breathless journalists lauded the “historic agreement.” Politicians and diplomats saved the world and us from ourselves. But the lack of any binding mechanism means the Paris climate agreement is a failure—and that’s a good thing—says the IPA’s James Paterson on Sky News.
All you need to know about such attempts at ‘climate planning’ can be found in this wonderful piece at FEE by Jeff Tucker. For one, the markets yawned: there was no notable impact on global markets at all. More fundamentally, Tucker highlights the pretensions of the climate planners (with a little help from our friend Fred):
If the planning elite possessed omniscience of all facts, flawless understanding of cause and effect, perfect foresight to know all relevant changes that could affect the future, and the ability to control all variables, perhaps their pretensions would be justified.
But this is not the case. Hayek called the assumption the harshest possible word: “charlatanism.” …
Science requires freedom, not central planning. The idea that any panel of global experts, working with appointed diplomats and bureaucrats, can have the requisite knowledge to make such grand and final decisions for the globe is outlandish.
In the end, he quotes Hayek’s “epic” conclusion:
The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society — a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.
We ought heed this warning, not just in resource policy and climate planning. My personal gripe is with migration, citizenship, and jurisdictional planning. But the lesson applies to all aspects of social and political life: “To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.”