You are browsing the archive for 2013 August 20.

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Happy Birthday, Ron Paul!

August 20, 2013 in Economics

By Peter G. Klein

Hazlitt dinner

Happy birthday to Ron Paul, Distinguished Counselor of the Mises Institute and longtime supporter of  Austrian economics. Here’s Dr. Paul with Henry Hazlitt, Murray Rothbard, and Lew Rockwell, from a 1987 dinner in honor of Hazlitt.

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Source: MISES INSTITUTE

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Doing Business, Singapore Style

August 20, 2013 in Economics

By Steve H. Hanke

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Steve H. Hanke

Since 2004, the World Bank has produced the annual Doing Business report, which ranks countries on ten factors reflecting the ease with which entrepreneurs and businesses may conduct economic activity in a given country.

At first glance, such a survey would hardly seem controversial. After all, with so much unreliable data coming out of official government statistics offices these days, one would think that an unbiased system for ranking the ease of doing business would be a useful tool — not only for businesses, but for governments as well. Indeed, since 2005, a total of 1,940 reforms have been implemented by countries to improve their rankings. And, several prominent heads of state, such as Russia’s Valdimir Putin have made public pledges to improve their countries’ Doing Business rankings.

As it turns out, however, a few countries (specifically those with low rankings) are none too happy about the Doing Business report. While some world leaders have adopted the Putin model of viewing their country’s relatively low rankings as a challenge to institute economic reform, other countries, most notably China (which ranks 91 out of 183), have been pressuring the World Bank to scrap the Doing Business rankings and weaken the report’s analysis to the point of irrelevance. It hasn’t helped that certain less-market-friendly NGOs, such as OXFAM, have also joined the Chinese government’s crusade.

Indeed, under pressure from China, World Bank President Jim Yong Kim commissioned a panel to “study”the Doing Business rankings and present recommendations for “improvement.” Not surprisingly, the commission recommended doing away with the actual ordinal rankings, and switching to a less embarrassing evaluation of each country.

Yes, the panel’s recommendations are nothing more than a thinly-veiled attempt to gut the Doing Business report. Stripping the ordinal rankings and “reforming” the report’s methodology would have the effect of completely destroying the report’s credibility and usefulness as a policy tool. Fortunately, the Doing Business report has one very important ally, Jim Yong Kim himself. A campaign to save there port has also been mounted by Doing Business report co founder, former World Bank Group Vice President Michael Klein.

These World Bank insiders recognize a simple fact — one which many businessmen, politicians, civil servants, and economists, like myself, have long understood. The Doing Business report represents one of the few uniform, objective metrics available for measuring the ease of doing business across 183 countries. Indeed, in 2005, when asked what I thought …read more

Source: OP-EDS

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Inflation Inferno Roared Away until Mid-November 2008

August 20, 2013 in Economics

By Steve H. Hanke

Steve H. Hanke

Sir, Andrew England’s otherwise edifying reportage in “Mugabe undaunted” (Analysis, August 16) contains errors of omission and commission, when he brushes up against the topic of Zimbabwe’s hyperinflation — the second highest in world history.

Mr England asserts that, in 2008, “inflation had become incalculable, with an official figure in July that year putting it at 231m per cent.”

First, the error of commission: in 2008, calculations of implied inflation rates were being made in every shop in Harare, on a real-time basis — as is always the case during hyperinflations. Indeed, everyone in Zimbabwe was keeping their eye on the black-market Zimbabwe dollar/US dollar exchange rate, knowing that local prices in Zimbabwe dollars were rising tick-for-tick as the Zimbabwe dollar lost value against the greenback.

In addition, Alex Kwok and I were making objective and reliable calculations of inflation on a weekly basis. Among other things, this gets to the error of omission. Yes, Zimbabwe stopped producing inflation numbers in July 2008, as Mr England states. But the hyperinflation inferno kept roaring away until mid-November 2008 (See S H Hanke and A K F Kwok “On the Measurement of Zimbabwe’s Hyperinflation.” Cato Journal, Spring/Summer 2009).

On November 14 2008, Zimbabwe’s hyperinflation peaked at a year-over-year rate of 89.7 sextillion per cent — that’s roughly 9 followed by 22 zeros. At that rate, prices were doubling every 24.7 hours. While this is still below Hungary’s July 1946 world record hyperinflation, in which prices were doubling every 15 hours, Zimbabwe’s mid-November peak rate was still 30m times higher than the last official inflation statistic produced by the government, and reported by Mr England.

Steve H. Hanke is a Professor of Applied Economics at The Johns Hopkins University in Baltimore and a Senior Fellow at the Cato Institute in Washington, D.C. Dr. Garbis Iradian of the Institute of International Finance.

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Source: OP-EDS

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Saving Consumers from Lower Prices

August 20, 2013 in Economics

By Richard W. Rahn

Richard W. Rahn

Why does the Obama administration claim it wants you to pay less for your airline ticket, but more for the shrimp you buy? One reason the economy keeps stumbling along is that businessmen, consumers and taxpayers are having a hard time planning because of endlessly inconsistent and often lawless policy directives from the Obama White House. On the same day last week, the administration announced that it was seeking to block the proposed American Airlines-US Airways merger, allegedly to protect consumers against higher prices — and that it might impose higher duties (taxes) on shrimp from foreign competitors to protect U.S. shrimpers, meaning that all who eat shrimp will have to pay more.

The Justice Department, under the leadership of ethically and intellectually challenged Eric H. Holder Jr., came up with a study that concluded that airline ticket prices would be higher and service worse if American Airlines and US Airways merged. The conclusion was immediately challenged by affected parties (the companies and the unions) and many transportation economists. I do not know, as a frequent flier, whether I will be better off or worse off with the proposed merger. I do know, however, that the folks at the Justice Department also do not know, but trying to block the merger massages their egos and their lust for power.

For the Justice Department to know that the merger will cause higher prices, it would have to know what the affected airlines will do if they do not merge, how competitors will respond, and how many new entrants will or will not come into the market. In fact, Justice knows none of this. American Airlines is now in bankruptcy. If it is not allowed to merge, it could go out of business, meaning less, not more, competition. The airline industry is one of the most competitive, and the costs of entry are modest (you have to raise enough money to buy or lease at least one plane). Over the past 30 years, dozens of airlines have come and gone. Personally, I prefer to fly on airlines that are profitable because they have more money to spend on service, newer planes and safety. The fact that the Justice Department chooses to waste money on this totally unjustified antitrust action merely shows it still has far too large a budget, despite sequestration. Hint to members of Congress who are looking for places to …read more

Source: OP-EDS