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If Britain Is to Succeed Post-Brexit, It Must Be Open to Creative Destruction

August 30, 2019 in Economics

By Ryan Bourne

Ryan Bourne

In a new tour de force, Openness to Creative Destruction, University of Nebraska economist Prof Arthur Diamond outlines the problem. Public debates severely underplay the creative aspects of “creative destruction” and exaggerate the losses. We mourn the visible demise of high street stores, the decline of manufacturing jobs, or closing hospitals, almost as if they were the deaths of people. We do not celebrate the gadgets, design jobs or specialist units that replace them, nor acknowledge that it’s the very destruction itself that frees resources for yet more creations.

It’s a sign of our extreme complacency that we presume all this is inevitable. Economists commonly project out 50 years hence with forecasts of sustained growth, because that’s what we’ve recently experienced. We forget that almost all human history before 250 years ago was defined by grinding poverty and little meaningful progress.

Analyse stories such as the Wright brothers and the aeroplane, how Walt Disney developed colour cartoon movies, or Steve Jobs the Apple iPhone, and you’ll realise innovation really isn’t guaranteed. It is invented, made and earned, and quite often comes from self-funded entrepreneurs and inventors who tinker, challenge conventional wisdom and even the scientific consensus.

Yet if you accept progress from innovation isn’t certain, you realise we must be vigilant to the culture and policies needed to sustain it. A culture of openness to new ideas and businesses, and a policy framework conducive to that end, becomes crucial. Given we went from stagnation to lots of innovation in the 18th century, it stands to reason that bad policies and a turn against capitalism might quell innovation again.

With Brexit approaching, we already see the think tank Onward declaring the Conservatives should pivot from emphasis on “liberty” to “security”. Demands to insulate or protect certain industries will arise as trade policies are repatriated. The Brexit vote itself has been said to warrant government-led plans to “revive” towns, high streets and manufacturing. Policymakers in all cases delude themselves that we can keep the creative innovation, but eradicate the destruction. Yet the two are inextricably linked. Our past economic liberties are precisely what generated the securities we enjoy today. The word “comfort” was only first used in its modern sense in 1770.

In fact, if Britain truly wanted to be at the innovative frontier of growth, we would go further than today. Recognising that stagnation is miserable, we would adopt policies conducive to more creative destruction and the progress …read more

Source: OP-EDS

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Canada's 'Free' Parental Leave Is One Reason I Don't Live There

August 30, 2019 in Economics

By Ilya Shapiro

Ilya Shapiro

Sens. Bill Cassidy, R-La., and Kyrsten Sinema, D-Ariz., just unveiled the first bipartisan legislative
proposal for federal subsidies for families after childbirth, which
would “help working families now by funding paid parental
leave or infant care expenses through advancing the Child Tax
Credit.”

The proposal is similar to bills introduced by other members of
Congress — Republican Sens. Joni Ernst of Iowa, Mike Lee of
Utah, Mitt Romney of Utah, and Marco Rubio of Florida, as well as
Republican Reps. Dan Crenshaw of Texas and Ann Wagner of Missouri
— that would allow new parents to tap up to three months of
Social Security payments after the arrival of a child. (Full
disclosure: These bills are modeled after a white paper written by my wife, Kristin Shapiro, a
senior fellow at the Independent Women’s Forum.)

Cue the leftist hysteria. Hours after the Cassidy-Sinema bill
dropped, Sen. Kirsten Gillibrand, D-N.Y., attacked the bill as “another proposal
that would force working families to borrow from their own
futures.” The United States, progressives say, is the only developed country
that doesn’t subsidize parents’ care for newborns.
Well, I’m a citizen of both Canada and the United States, and
the fact that Canada “gives” its citizens parental
leave is one reason (apart from the weather) that I don’t
live there.

The Burden of Employment Insurance

Canada provides paid leave through its “Employment Insurance,” which also supports
workers during unemployment, illness, and family caregiving. I get
why some of its southern neighbors envy this socialist nirvana. Who
wouldn’t want to go on the dole at those times, eh?

But Employment Insurance costs working families dearly. If my
family moved to Canada, my wife and I would pay nearly US$125,000
in added payroll taxes during our lives to fund the program. (You
can find all tax calculations below — and I translated the
loonies into greenbacks.*) That’s a lot of Canadian bacon!
We’d technically split this amount with our employers, but
any economist will tell you an employer payroll tax is really part
of the employee’s tax burden.

As a higher-income household, we’re not a sympathetic
case. But because Canada’s payroll tax – like most payroll taxes — is regressive,
it costs lower-income families a greater share of earnings. A
family in which each spouse makes $35,000 per year, for example,
would pay nearly $110,000 in added taxes, even though its household
income is substantially less than ours. Notably, a whopping
8.4 percent of that, or about $9,000, won’t even
go toward benefits (which they may never use), but …read more

Source: OP-EDS

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Segregation and the School Choice Movement

August 30, 2019 in Economics

By Neal McCluskey

Neal McCluskey

America is, rightly, having a reckoning on race. The
nation’s history is scarred by its too-often horrific
mistreatment of African Americans, from slavery, to Jim Crow, to
discriminatory government housing policies that lasted into the
1960s. Righteous indignation can, and should, well up in
one’s heart. Progress, though, depends on understanding that
there are good people who see the same problems, but not the same
solutions. It requires operating with the starting assumption that
even those on opposite sides of the policy debate are animated by
good intentions.

Journalist Amanda Ripley wrote an excellent article recently aimed at helping
journalists cover controversial issues in our sharply divided
society. After speaking with the likes of Righteous Mind author Jonathan Haidt,
Ripley concluded that the key to productive interaction is to get
to know your ideological opponents—learn about who they are,
and why they believe what they believe—and to wrestle with
their experiences and beliefs. Doing so often reveals our opponents
to be decent human beings, and complexity—seeing the nuances
of what they believe—causes us to “become more curious
and less closed off to new information.”

It can often turn out that those with whom we disagree, even
vehemently, also want to serve justice. But how they see justice is
different.

Many people support
school choice not only out of principle, but based on historical
and present reality: public schooling has repeatedly produced
repression, exclusion, and other chronic problems.

Which brings us to “Segregationists, Libertarians, and the Modern
‘School Choice’ Movement
,” a recent article
by Steve Suitts of the Southern Education Foundation. Suitts
asserts that school choice supporters are at best
“indifferent” to school segregation, and cynically
promote choice by invoking civil rights. Suitts ties choice
supporters directly to Southern segregationists who, following the
1954 Brown v. Board of Education Supreme Court decision
requiring public school desegeregation, advocated for choice so
whites could attend private “segregation
academies.”

I have struggled with how to respond to Suitts, and contemplated
a blistering condemnation. But indignation over injustice, which
Suitts expresses, is normal, and he is absolutely correct that
there has been great injustice inflicted on African Americans.
Rather than try to satisfy my immediate urges and pummel Suitts
with acidic attacks on his character and blind spots, my hope
instead is to present and explain the good motives I
believe animate many school choice supporters—the
justice-seeking motives—hopefully advancing the kind of
understanding approach to political debate that can contribute to
real progress.

The Principle

The bulk of Suitts’ condemnation of school choice is
grounded in the fact that some segregationists offered arguments
for choice couched in the same terms as current choice supporters.
These include appeals …read more

Source: OP-EDS