Wednesday, April 30, 2008

Who da Liberal?

Sometime back, a friend of mine writing an article for the ST Mirror commented that I have a passion for "Liberal Economics". Immediately, that label is confusing. After all, economics is just, well, economics. There's the good economics, the bad and the very ugly, adding a political modifier to what is essentially a science can only lead to confusion.

There's perhaps no word in the English language subject to more abuse than the world "Liberal", Americans (mostly) use it to refer to democrats, the kind who thinks that governments should take care of people from cradle to grave. In Europe, the term (which derives from the Latin word Libre meaning free) largely retains it's original meaning of individual freedom manifested in it's political, cultural and economic sense. In places like India and Sri Lanka the label is even more confusing where people claiming to be liberal can come be from all over the political spectrum. My guess is the thinking here, particularly among the Colombo elites (whom I fondly call Colombo Liberals) have been influenced by American political language, which is completely incompatible with the local political landscape and hence, the confusion.

Personally speaking, although I'm often accused of being one, I religiously avoid using the term Liberal to describe my political leanings. When I have to, I use the term Libertarian to describe my politics which is the political philosophy of Classical Liberalism (true liberalism in my opinion).

Coming back to economics, it is true that economists may have certain political goals, therefore the term "liberal economics" may not be a total misnomer. But given the amount of confusion of the term generates and given the fact that no serious economist relies on politics to describe or justify their work, the label is little more than annoying if not completely wrong.

For more on the abuse of the term by the American left see Jonah Goldberg's book Liberal Fascism and India Uncut's Amit Varma's take.

Tuesday, April 29, 2008

Sri Lanka Celebrates Earth Hour

In typical Sri Lankan fashion - about a month late and for a few more than one hour. Ok so it was an island-wide power failure. Given the frequency of these failures, (multiple times a month where I live) the folks at Greenpeace or WWF should nominate the Ceylon Electricity Board for the Nobel Prize this year.

To me the whole Earth Hour idea is symbolically a catastrophe, and today this reminded me of a post in Cafe Hayek on the subject. Here's a key excerpt from a letter written to WWF:
You and members of your organization worry that industrialization and economic growth are harming the earth's environment. I worry that the intensifying hysteria about the state of the environment - and that the resulting hostility to economic growth - might harm humankind's prospects for comfortable, healthy, enjoyable, and long lives.

So I commend you on your "Earth Hour" effort. Persuading people across the globe to turn off lights for one hour supplies the perfect symbol for modern environmentalism: a collective effort to return humankind to the dark ages.
Do read the whole thing.

Sunday, April 27, 2008

Defining Globalization

unlike those anti-globalization types, who tend attribute globalization to everything they don't like (poverty, war, disease, job-loss, etc.) I tend to use Tom Palmer's non-moralized definition , "The diminution or elimination of restrictions on exchange across political borders". That pretty much sums it up. But a friend of mine emails me this more funnier definition :
Question : What is the truest definition of Globalization ?
Answer : Princess Diana's death.

Question: How come?

Answer : An English princess with an Egyptian boyfriend crashes in a French tunnel, driving a German car with a Dutch engine, driven by a Belgian who was drunk on Scottish whisky, followed closely by Italian Paparazzi, on Japanese motorcycles; treated by an American doctor, using Brazilian medicines.

This is sent to you by a Sri Lankan , using Bill Gates's technology, and you're probably reading this on your computer, that uses Taiwanese chips, and a Korean monitor, assembled by Bangladeshi workers in a Singapore plant, transported by Indian lorry-drivers, hijacked by Indonesians, unloaded by Sicilian longshoremen, and trucked to you by Mexican illegals.....

That, my friends, is Globalization!!!!

British Humour

or just really bad logo design. This is what some Brits came up with for their Office of Government Commerce:

Ok, so they meant it at a different angle. But surely, someone had to notice that the logo is masturbating. The Telegraph has the story. This is after that infamous Olympic logo fiasco after spending £400,000 on it's design. That looks like some guy giving a hand job to another guy. or maybe it's just me..

Friday, April 25, 2008

Government Bullying Ganja Farmers

According to the Daily Mirror,
The Excise Department Narcotics Detection Unit recovered a large stock of Ganja worth over Rs.2 million in Tanamalwila area during a special operation today [link]
There's only one thing Thanamalwila is famous for - Ganja (Marijuana) . You know that, I know that, the local authorities knows that. In fact, if the Nacrotics Detention Unit were to raid thanamalwila weekly, they'd probably keep on discovering "large stocks" of Ganja.

The point is, you can't really enforce a law against something for which a large number of people have no opposition for. Murder and theft are enforcible by law, because people in general agree these are crimes. Illicit liquor, Ganja, smoking in public or no-liquor on the Buddhist Poya Day cannot and should not be crimes, because for one, these 'crimes' are victimless and secondly, most of them are non-enforcible because not enough people agree these are crimes.

The so called "drug war" in the U.S., an attempt to actually enforce anti-drug laws is a monumental failure, but selective enforcement, like what happens in Sri Lanka is not really much better and amounts to nothing but bullying by the government.

So yes, if you haven't figured it already, legalize Ganja!

No such thing called a Free fu*k

Dinidu reminds me of this one time at band camp, ok no, over vodka, we invented (I'm pretty sure it was just me, and not "we") the phrase there's no such thing called a free fuck. Although, at the time we kind of meant it differently, suggesting that no sex really comes without emotional baggage, direct payment or other consequences, the quote is pretty much a derivative of the infamous saying often attributed to the economist Milton Friedman who liked to remind people that there's no such thing called a free lunch.

Now what this really mean is not that you won't ever get to have no-strings-attached sex. (or lunch for that matter) it just means to get something you like, you have to give up something else you also kinda like. That is, the "cost" of something is whatever you have to give up to get it. So even if your friend sponsors you a hooker, who comes to your house to have sex with you, and you don't really have a girlfriend to feel guilty about, there will always be costs, like the time wasted having sex, while you could have watched good TV. Sometimes (probably most), the costs are well worth the benefits.

Economics of Sex is a fascinating subject, something I wish I could write more on.

Saturday, April 19, 2008

Inflation for Dummies.Take 2

Mises Institute blog recently had an interesting piece by Henry Hazlitt on "everything you need to know about inflation". Here's a key excerpt:

The word "inflation" originally applied solely to the quantity of money. It meant that the volume of money was inflated, blown up, overextended. It is not mere pedantry to insist that the word should be used only in its original meaning. To use it to mean "a rise in prices" is to deflect attention away from the real cause of inflation and the real cure for it.

Let us see what happens under inflation, and why it happens. When the supply of money is increased, people have more money to offer for goods. If the supply of goods does not increase — or does not increase as much as the supply of money — then the prices of goods will go up. Each individual dollar becomes less valuable because there are more dollars. Therefore more of them will be offered against, say, a pair of shoes or a hundred bushels of wheat than before. A "price" is an exchange ratio between a dollar and a unit of goods. When people have more dollars, they value each dollar less. Goods then rise in price, not because goods are scarcer than before, but because dollars are more abundant. [link]

Do read the whole thing. Hazlitt is the author of the extremely useful book Economics in One Lesson, which is a great introduction for economics for anyone. He's also the author of many other books found free on the Mises Institute site.

It's interesting how more and more economists keep giving pseudo-Austrian analysis on the current financial crisis in the U.S. and the problem of inflation. In a recent column Fuss-Budget of Lanka Business Online does much the same. Are we all Austrians now?

Economists in the Austrian School generally advocate a return to the gold standard, or a free-banking system , or 100% reserve banking (a currency board arrangement, etc) to tackle the problem of inflation and the creation of "bubbles resulting from malinvestment.

Related, my own version of Inflation for Dummies.

Friday, April 18, 2008

Obama's Bad Day

That's probably an understatement. Obama's debate performance on the last democratic debate is the worst I've seen of him. Obama having gone through a rough time, with his 'bitter' comment and pastor wright's association came under heavy fire under Clinton and the two anchors from NBC.

For a someone who's winning, Obama looked defeated. He looked tired and weary and he tumbled over the first 40 minute of the debate trying to fend off attacks, and looked incoherent and stuck to rehersed-answers for the rest of the debate. It wasn't pretty. Clinton on the other hand looked competent, and for the first time can confidently say she won the debate.

Obamedia is trying to spin this as a great failure of the NBC moderators, and how being lost will actually help Obama. Bullshit. Someone should remind them that Charles Gibson and George Stephanopoulos are not running for the democratic nomination, Barrack Obama and Hillary Clinton is.

and let's not talk about this , "oh how unfair, the debate-didn't'-get-to-the-real-issues" nonsense. Are we retarded? I mean, if someone was living under a rock for the past year, maybe that's a relevant question. People know their positions on the issues, and guess what, it's not so different. So let's play this straight, it ain't about the issues anymore, it's about personality. In fact, it was personality all along and Obama was winning it. So the Obamedia can stop whining about getting a black eye now. Grow up, and admit it. Obama Lost the Debate. End of story.

The real winner, may not have been in the debate. I keep telling my friends to get used to the term President McCain. This guy has some luck, and that's a dangerous asset to have in an election. If there's one thing McCain could have wished for, that's for the two Dems to keep fighting, and that's exactly what's happening.

I think Obama would still be the nominee, and like I've said before, I do like him, really. I hate Hillary, I mean, if Hilary Clinton and George Bush happen to run for president, I'd pick a clear candidate, and it ain't Clinton. If it turned out to be (as it should) a McCain Vs. Obama election, then that's a difficult choice. Luckily, a choice I don't have to make.

Related, Why Not Obama.

Thursday, April 17, 2008

Our Socialist Ways

Today the Sri Lankan government announced price controls on rice. From the Daily Mirror:

The government in a move to control the escalating prices of locally produced rice imposed maximum wholesale and retail prices from midnight yesterday. A gazette notification to this effect was issued last night.

According to the new government regulations, the retail price of Samba rice will be Rs 70 per kilo while the wholesale price will be Rs 63. Prices have been fixed for Nadu, Rathu Kekulu and Sudu Kekulu rice as well.

Trade Minister Bandula Gunawardene told a news conference last night that this decision was taken to resolve the current crisis in the marketing of rice and to control the sky rocketing prices. He said this was the first time in the country’s history that price control had been imposed on rice.

[..]The minister said that those who sell above the specified rates and those who hide stocks would be severely dealt with under the Consumer Protection Act. [link]

This is coming from the supposedly pro-market minister of trade and consumer affairs, Bandula Gunawardene who previously warned that he would introduced legislation which could bark and bite solve the problem of cost of living. With pro-marketers like this, who need socialists?

No, I'm not saying we are on the road to serfdom just yet, but like I've said before, we still have this socialist mentality which assumes we can centrally plan the economy. It's one thing allow the market to flourish and introduce regulation where you think it's inefficient (I would argue against it, but at least that's tolerable), it's quite another to believe that a government bureaucrat knows the accurate price of something.

Wednesday, April 16, 2008

Typically Sri Lankan

This blog has taken a new year break, and like many Sri Lankans, a long one. But fear not, it will return soon.

Typically, it takes about a week from the official holidays, (and the other holiday we got because the official holiday is on a Sunday) for everyone to start working. It's frustrating sometimes, I know. Someone should really do a GDP cost of having a 11-month working year.

Wednesday, April 09, 2008

Starving Billionaires

With the rate of inflation at 100,000% that's the state of affairs in Zimbabwe. Recently, the Zimbabwean reserve bank put out a $50 Million currency note. I wonder if the Zimbabwean central bankers are pushing "cost-push" theories like their Sri Lankan counterparts. "Oil is expensive you see, you'll have to pay 16 Million for that bread". Now with the 50 Million note , at least carrying cash will be easier. Just ask this littler chap.

The country has a black market for US Dollars, a (black)market-led dollarization of sorts. Something I think should be allowed to happen elsewhere, legally.

There might now be hope so, here's what Morgan Tsvangirai, the man who should be Zimbabwe's next president said recently in a WSJ article:
Today, Zimbabwe ranks last out of the 141 countries surveyed by the Fraser Institute's Economic Freedom in the World report. According to 2007 World Bank estimates, it takes 96 days to start a business in Zimbabwe. It takes only two days in Australia. Waiting for necessary licenses takes 952 days in Zimbabwe, but only 34 days in South Korea. Registering property in Zimbabwe costs an astonishing 25% of the property's value. In the United States, it costs only 0.5%. [link]
At least someone there gets it. Hope might be short lived though, power transfers from dictators are never smooth.

[bank note link via reason, WSJ quote via division of labor]

Tuesday, April 08, 2008

Quote of the Century

This one is for you democrats (and local variants). Apparently, this fellow called Joseph Sobran said this:
"Need" now means wanting someone else's money. "Greed" means wanting to keep your own. "Compassion" is when a politician arranges the transfer.
ring true..? it should.

Monday, April 07, 2008

The Myth of the Open Economy

The Sri Lankan left (and it's modern-day 'mainstream' apologists) often point to 1977, the year when Sri Lanka started liberalizing the economy to describe anything 'bad' to do with Sri Lanka, from moral degradation, the persistence of poverty and occasionally as the root cause of the war.

Recently, when I pointed out that the partial liberalization in '77 has in fact, increased per-person income levels of Sri Lankans, a reader (and my friend) Andy, left the this comment:
Ya, it has increased incomes. But This can be hardly called great development. Countries like Singapore, the Asian Tigers have grown much faster.

Open Economy in Sri Lanka has not worked well enough. Maybe it's the war.
Now, I don't like the phrase, "Open economy" for two reasons. one, it somehow gives this notion that being open or not open to international trade is the only concern in a modern economic system, which is clearly not true. Two, in Sri Lanka the term is used as a catch-all-phrase for market liberalization. I prefer the term a free-market economy, but Sri Lanka isn't much of a free-market either, nor is it all that 'open' under any sort of definition.

To answer Andy, if at all the "Open Economy" has not worked, it's because the economy hasn't been open enough or if you ask me, isn't free enough.

Sri Lanka still has a mediocre socialist attitude towards policy.

In recent times, policymakers proposed using (and have used) price-controls to tackle inflation, we have a string of failing state enterprises, and if that's not enough we start more disasters. Investing in Sri Lanka is made difficult, with excessive restrictions on capital transactions, so on. The Central bank has lost all credibility as an independent institution and comes up with absurd theories to justify 20+% inflation. The labor market is heavily regulated, wasteful subsidies and welfare schemes which are nothing but political support systems

Entrepreneurs in Sri Lanka face high taxes, all sorts of restrictive licensing requirements and bureaucratic red tape, which results in heavy corruption. The World Bank doing business report in 2008 ranks Sri Lanka 101 of 178 countries, down 1 place from last year. We are with the worst lot when it comes to ease of doing business and things are not getting better.

We have a bloated government, the largest cabinet of ministers in the world and possibly the largest bureaucracy in the world with over a million state-sector employees for a country with 21 million people - one bureaucrat for every 20 people. India, often thought of as the worst bureaucracy only has about a 1:54 ratio of bureaucrats to people. The government spends most of our taxes on paying salaries to keep this massive bureaucracy alive, not on infrastructure, education or health, and no, not even the war effort. We simply can't afford this.

So no, Sri Lanka isn't much of a free-market. Yes, there are things we have managed to right and It's great that Sri Lanka still manages to grow, despite the government and despite the war, but things can be so much better.

There are two indices which measure how "free" an economy is. One published by the Heritage Foundation/Wall Street Journal ranks Sri Lanka 90 out of 162 countries. They are kinder, whereas the report published by the Fraser Institute ranks Sri Lanka 101 out of 142 countries. (pdf link) . The two reports differ on approach with the Heritage foundation depends on a more subjective analysis using a group of experts while the Fraser Institute relies on purely statistical analysis to come up with the rankings.

In both cases, Sri Lanka's rating is nothing to write home about, and that should tell the story why we are still a poor country. Economic Freedom promotes economic growth and prosperity and if we can have that, we can still progress despite having a war, like Ireland and so many other countries have.

Sunday, April 06, 2008

Jeyaraj, RIP

I already said this is one bad year for for MPs and it seems more so for MPs in the Gampaha District in Sri Lanka. Jayaraj Fernandopulle, the minister of Commerce and strongman of the SLFP has been a target of the LTTE for sometime now, it's generally believed that the claymore mine which killed Minister D.M. Dassanayake was intended on Jeyaraj Fernandopulle.

Jeyeraj knew the threats to his life, but he didn't take security arrangements seriously. Much to his family's distress. He was an ambitious guy as well, he has come a long way in politics and more recently has had an ambition to be Prime Minister. He was genuinely popular in his constituency, so much so that there is a Perahara in his honor in Negombo.

There's a lot I can say about Jeyaraj, but I'd rather let the man rest in peace. To be honest, I'm kind of sad.

Saturday, April 05, 2008

Selling Adam Smith's House

This week Edinburgh's city council selling Adam Smith's house,
This week Edinburgh's city council put on the market the house where Adam Smith spent his last 12 years, from 1778 until 1790. Advertisements in the property sections of local newspapers seek offers in excess of £700,000 ($1.4m) for a 17th-century house of historical interest, but fail to point out its connection with the father of modern economics.

This indifference to one of Scotland's greatest sons in the city where he spent much of his adult life is curious, but consistent. His house, recently a municipal centre for troubled boys, has a small, tarnished bronze plaque recording it as the town house of the Earls of Panmure and the home of Adam Smith. [link]

I'm with Alex Tabarrok when he says that " it would be a disgrace if the house went to anyone but the highest bidder". So this campaign by some concerned individuals (which includes some Edinburgh's economists) to save Smith's house is rather surprising.

In some ways, it throws light into a key Smithian insight of self-interest, which is often misunderstood to mean "selfishness" or "greed". Self-interest can, at times, be charitable. That's something Randians, who likes to talk about the virtue of selfishness and left-wing critics who likes to talk about, well, nonsense never seems to understand. The Market works on self interest, not necessarily greed or selfishness which are just human traits visible in any system.

and Self-interest, is what is driving these fans of Adam Smith to "Save" their hero's home from a potential demolition. I wish them luck, but I hope they intend on doing this by becoming the highest bidder and not by throwing political weight, which would be a disgrace to Adam Smith.

Tuesday, April 01, 2008

Pooja Endorses SLT. or does she?

According to LBO, Pooja Umashankar, the Sri Lankan/Indian actress has been appointed as Sri Lanka Telecom's brand ambassador for Broadband services. Bad move, Pooja, really. We hate SLT. It's slow, and if you ever call them for Technical assistance for absolutely anything, they think it's because of spyware.

But maybe she's not that dumb, see..
"I personally will not endorse any product which I would never use," Umashankar told reporters after being appointed brand ambassador for the telecom operator. [link]
Now, doesn't she live in India? I don't have the slightest clue. If she did, this is her way of saying " DONT USE THIS CRAP, MY MANAGER TOTALLY TALKED ME INTO THIS!". Either that, or she's a bit blond, like anar!!

Doesn't matter anyways, luckily I got a free life-time connection from Dialog Broadband. To get yourself one, Click here.