Archive for Economics

Bring Income Tax Repeal To Canada

Dave Killion — February 5, 2013

The Frontier Centre for Public Policy brings to our attention a recent Wall Street Journal article concerning state income taxes in the U.S., and the governors who are looking to eliminate them

“Washington may be a tax reform wasteland, but out in the states the action is hot and heavy. Nine states—including such fast-growing places as Florida, Tennessee and Texas—currently have no income tax, and the race is on to see which will be the tenth, and perhaps the 11th and 12th.”….”Income taxes generally do more economic harm (than sales taxes) because they are a direct penalty on saving, investment and labor that create new wealth. Sales taxes, by contrast, hit consumption, which is the result of that wealth creation. Governors Jindal, McCrory and Heineman cite the growing evidence that states with low or no income taxes have done better economically in recent decades compared to states with income-tax rates of 10% or more.”

Replacing lost income tax revenue with sales tax revenue is frowned on in some circles as regressive, since families who don’t currently pay income taxes will become subject to sales taxes. There are ways to correct this, such as declining to tax certain items such as food and clothing, or issuing tax rebates. But the optimal solution? Cut spending. Government is too big, does too much, and does it all poorly. Roll it back, and enjoy your increased prosperity.

The benefits of eliminating the income tax are well-established. The only questions are these: why is there NO Canadian province or territory without an income tax, and why is there no one in Canada campaigning for repeal? I wish I knew. But if the Free Province Project gets some legs, don’t be surprised if this is one of the first issues they take on.

The Appropriate Answer

Dave Killion — February 3, 2013

“There is no such thing as unregulated businesses. They are either regulated ineffectively by the state, or they are regulated effectively by the market.”

It is widely held that in the absence of state regulation, business could get away with endangering it’s customers and employees, selling shoddy goods, and destroying the environment. Market forces do not permit any of that to happen to any significant degree.

Time Will Run Back

Antony — December 13, 2012

Book Review: Time Will Run Back, by Henry Hazlitt

Henry Hazlitt’s novel Time Will Run Back explores the subjects of capitalism and free society from first principles, by looking at them from the naive perspective of a world in which they are unknown concepts.

The novel is set about 100 years in the future, in a world in which the Soviets won the cold war. The entire world is run as a communist dictatorship with a centrally planned economy. Through a series of chance events, a young man named Peter comes to lead the nation. Peter, unlike everyone else in the society, has been raised without being indoctrinated into the communist ideology, and thus is able to approach the problems he faces as leader without any preconceptions.

The novel describes how Peter tries various methods of organizing the production and distribution of goods in society. In trying to solve his immediate problems, he keeps running into new problems as unintended consequences of his different economic interventions. These problems include both calculation problems, where the central planners are unable to obtain the information necessary to properly allocate resources, and motivation problems where the workers have no incentive to be productive. Through a series of trial and error steps, Peter comes to discover that a system of private property ownership with free exchange is the only way to properly organize an economy.

Although the book does an excellent job in its treatment of economic principles, it overreaches a bit when Peter goes on to sort out the political setup of the country. He basically ends up re-creating a democratic republic similar to the United States, but the reasoning for for this setup is not convincing. It seems contrived, and influenced by the author’s preconceptions, in contrast to the parts dealing with economic reform, in which the reasoning was logical, and various pitfalls with non-free market arrangements were well explained.

Overall, this book is well worth reading. The premise of a person naively trying to solve economic problems is an excellent thought experiment to explain the pitfalls of various forms of central economic planning. The novel was apparently inspired by Hazlitt’s reading of Socialism by Ludwig von Mises, and it does a good job of outlining the socialist calculation problem in a fun and accessible manner.

Tax the Rich?

Antony — November 15, 2012

As the US approaches the so-called “fiscal cliff”, there are increasing calls to raise taxes on “the rich” to help increase government revenue. Many of the wealthy themselves, such as Warren Buffett, are joining this call, seemingly putting the greater good before their self interest. But if we analyze the situation more closely, we see that their motives may not be so pure.

Are they proposing that the government seize the accumulated fortunes (or a portion thereof) of people like Buffett? No, the increased taxes will be on high incomes. In other words, people who are already wealthy will not necessarily pay more tax, but those who seek to become wealthy will. People such as young ambitious entrepreneurs, or growing family businesses.

The effect on society? Further economic empoverishment by discouraging wealth creation and innovation. The effect on the likes of Buffett? Another handy crutch, courtesy of his government buddies, to hobble any up-and-coming competitors, and entrench him at the top of the wealth heap.

This is just another example of the rich and powerful elites using political influence to secure their positions of wealth, all while the unwitting masses cheer them on.

As Goes Greece, So Goes The West?

Dave Killion — November 6, 2012


The Free To Choose Network pumps out a lot of good material, and this is no exception. Although moderately lengthy (57 min) it is well worth watching for its analysis of the circumstances which have given rise to the European financial crisis, the parallels to the U.S. economy, and the steps needed to not only end these crises, but promote future prosperity.


Free Enterprise Is A Moral Imperative

Dave Killion — November 4, 2012


Behold, the winner of the American Enterprise Institute’s 2012 Video Contest –

“We’re calling on everyone who loves America’s system of free enterprise to submit a short video (under two minutes) that sets forth its worth — not on the basis of political ideology or economic efficiency, but on the basis of simple moral truths, namely:

  • Free enterprise promotes earned success, which is the substance of lasting happiness.
  • Free enterprise promotes real fairness, based on merit and hard work.
  • Free enterprise does the most good for the most vulnerable by supplying both ample charity and unmatched opportunity.”

Clicking on the link will take you to the video contest gallery, where you can see not only the prize winners, but also 16 other notable entries. They are, individually and collectively, a stirring reminder of why libertarians like me are so fervent in our adherence to free market principles.

Quotation Of The Day

Dave Killion — October 31, 2012

“For all you hipster large and small towns in the northeast who have taken great pride in banning big box stores like Wal-Mart and Home Depot, good luck rebuilding after the storm.  I am sure you are going to be really happy that you banned retail establishments with worldwide logistics resources and that have developed special skills in routing supplies needed for post-storm cleanup.  Good luck getting a generator from that boutique hardware store you have been protecting.”

Coyote Blog – “A Note To The East Coast”

Chinese Cell Phones Manufacturers Are Poised To Make North American Consumers Very Happy

Dave Killion — October 24, 2012

From the desk of the ever-entertaining Red Ferret, happy news for cell phone consumers

“What happens when the people making your products decide they’re going to start doing it for themselves? And what happens when those factories and manufacturers start producing products which are not only equal to your fancy brand name devices, but actually better? …. Market decimation.”

It seems that China’s mobile phone manufacturers are responding to the ongoing economic downturn with a strategy that will see more powerful, less expensive phones entering the international market. And how is that working out? –

“The result is a growing range of products which are proving to be the match of the traditional big brands in just about every way. Chinese brands such as Xiaomi, Oppo, Meizu and CEIEC are producing products which not only hit the traditional cheap handset sweet spot, but can also compete head to head with the best that Apple, Samsung and HTC have to offer.”…. “In some cases these Chinese incumbents are offering high end specification products for literally a fraction of the usual price.”

It is amazing that in the course of a couple decades, market forces have led cell phones from being the size of a boot (and costing an arm and a leg) to a device that not only performs better, but is small enough and inexpensive enough that it is only a matter of time before they will be offered as cereal box prizes.  Thanks to government meddling, fields such as education and health care have been denied similar progress, but never fear. Entrepreneurs are constantly looking for profitable ways to work around government restrictions, and it is likely just a matter of time before even the most impoverished people will enjoy improvements in health care and education equal to that which the Chinese are currently bringing to mobile communications.

Too Many Rich People?

JMaddock — October 14, 2012

I was a little surprised by this Gallup poll, which suggests that most Americans believe the U.S. has either enough rich people or “too many”. Only 21% take the position that there are “too few” rich people in America, which seems like it should be the logical answer from anyone who wants the country to improve and succeed.

1990-2011 Trend: Perceptions About Number of Rich People in the U.S.

Obviously, questions like this one are inherently subjective. What constitutes a “rich person” is anyone’s guess. What we should do to ensure the optimal proportion of “rich people” likewise goes unspecified.

What surprised me, however, was the sheer number of Americans who cringe at the very idea of “rich people”, to the point of suggesting that there should be less of them. In addition, a majority of respondents seem to think that if a greater number of Americans were to become wealthy through their own enterprise and initiative, that would be a bad thing for the country as a whole.

If most citizens see an increase in the creation of wealth as harmful to society, it’s no wonder that the U.S. isn’t prospering economically.

U.S. “Out-Freedomed” On Every Continent

Dave Killion — October 2, 2012

“Americans love a winner, and will not tolerate a loser.”  General George Patton, 1944

So, what are we to make of the news that the U.S. has declined in global economic freedom from 3rd to 18th? –

“…. the decline began under President George W. Bush. For 20 years the U.S. had consistently ranked as one of the world’s three freest economies, along with Hong Kong and Singapore. By the end of the Bush presidency, we were barely in the top ten. And, as with so many disastrous legacies of the Bush era, Barack Obama took a bad thing and made it worse.”

By contrast, Canada has continued a slow, steady rise to it’s current ranking of 5, sparing Canadians the massive economic dislocations their southern neighbours are undergoing. True, Canada has it’s own time bombs ticking, and a reckoning is coming. But for the moment, Canada has more fully embraced libertarianism at the same time America has turned away. The consequences speak for themselves.

However, let it not be said that American decline is total! For those Americans who do  have a job, a mere 6 minutes of work at the national median wage is sufficient to pay for a pint of beer. That’s good for first place. Pity the poor Canadian, who must toil a full eleven minutes for the same reward. Well, given the economic forecast, it’s a good thing drowning your sorrows is so inexpensive in the U.S.

It may soon be all we can afford.