The Bear’s Lair: Competition is good for governments, too

It is a well-known economic principle, the central thesis of Adam Smith’s work, that competition between individual businesses produces better outcomes, while monopolies and oligopolies result in inefficiency and conspiracies against consumers’ interests. From the economic principles involved, the same is also true of governments. We should thus welcome nationalism and deplore both movements towards global government and agreements between governments to suppress this healthy competition. Continue reading

The Bear’s Lair: The costs of consensus

In many areas, such as monetary policy, the U.S. Supreme Court, corporate Boards of Directors and Cabinet government, decisions are made by arriving at a group consensus. If the group is sufficiently intellectually diverse, this works well. There is however a pernicious danger, which we have seen in action many times in economic policy, where an entire group forms a consensus around a generally held elite opinion. In those cases, disaster is likely to ensue. Continue reading

The Bear’s Lair: Towards the asset-light economy

The last two decades of low interest rates have seen a vast increase in the world’s stock of assets, measured at market value, largely matched by a corresponding increase in debt. However, the increase has not raised global productivity growth, which has slowed as the asset glut has increased. This points to a core economic secret: large agglomerations of assets are a drag on growth, wealth and productivity, and lead to repeated financial crises through their obsolescence. Going forward, we must devise ways to move towards an asset-light economy. Continue reading

The Bear’s Lair: Housing bubbles are universally destructive

Ever since this column started in 2000, I have been writing that British house property is hopelessly overpriced. There is no question this has been spectacularly bad investment advice – Londoners who owned a home in 2000 have at least trebled their money since then, doubling it in real terms. Nevertheless, it is possible for an asset to remain overvalued for decades, and I would like to examine the damage that overpriced real estate has done to Britain’s economy. Continue reading

The Bear’s Lair: The happy new world of tariffs

As President Trump imposes tariffs on China and elsewhere, much dark muttering is heard from the media and conventional economists about Smoot-Hawley and the 1930s. They are too gloomy. Two factors have changed since the 1930s: bloated government and the invention of computers, and their combination means that the Victorian dream of universal free trade is no longer optimal, even if it ever was. By upending conventional economic thought, Trump may well have improved the human condition. Continue reading

The Bear’s Lair: Learning the right lessons from 2008

Learning the right lessons from financial crises is tough. The 1929 stock market crash was blamed for all the ills of the Great Depression that succeeded it and led to two decades of regulation and socialism. In 1720, the British tried to stop all new company formations while the French gave up on finance altogether and started plotting revolution. So, it is unlikely that we have learned the right lessons from 2008, but it’s worth asking what lessons we should have learned, to avoid the same mistakes again. Continue reading

The Bear’s Lair: The Marie Antoinette economy

The Financial Times this week reviewed yet another adulatory biography of John Law, the financier/swindler/Keynesian responsible for France’s Mississippi Company disaster of 1716-20. Meanwhile the Congressional Budget Office published a suitably gloomy study of the budget cuts needed to stabilize U.S. public debt. With a massive financial crash coming, an inability to finance the government’s needs thereafter and social attitudes heavily favoring the destructive over the productive, 21st Century America increasingly resembles 18th Century France. Hopefully its fate will be less bloody! Continue reading

The Bear’s Lair: The delusions of infrastructure

President Trump is wise in many things, but he has two economic beliefs that are irredeemably foolish: low interest rates and infrastructure. To the joy of die-hard Hillary-lovers, I now propose to criticize one of those two beliefs: that in infrastructure. By and large, it is thoroughly overpriced currently, and very often yields far more costs than benefits, as examples around the world can show. Continue reading

The Bear’s Lair: De-FAANGing the world

Last weekend, Ben Carson’s Department of Housing and Urban Development filed suit against Facebook, claiming that its methods of segregating consumers for advertisers constituted redlining, violating Civil Rights legislation. The battle between Big Data and civil rights has thus begun, rather earlier than had been expected. It is just one of the forces that will ensure that the 2020s will be the decade of the FAANGs’ eclipse, not of their final triumph. Continue reading

The Bear’s Lair: The secular stagnation of Keynesian economics

Larry Summers recently reiterated his assertion that we are in an era of secular stagnation, suggesting in a new paper that low interest rates and an aging population may have caused this. However, the U.S. economy has recently shown substantial signs of growth, which appears sustainable. If President Trump can restrain his enthusiasm for low interest rates, Summers and his neo-Keynesian colleagues may definitively be proved wrong. Continue reading