Archive for October, 2012

Walter E. Williams on the incremental decline of freedom in the United States:

I am not saying that we are a totalitarian nation yet. But if you ask the question, which way are we headed, tiny steps at a time, are we headed towards more personal liberty or are we headed towards more government control over our lives?

If you take tiny steps towards any goal, it is just a matter of when you are going to get to that goal.

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barcelona

All too rarely I use this blog to share some photos. But my recent trip to Barcelona provided me with a bunch of pictures that may be worth presenting.

The Alps seen from the airplane

Street in Barcelona

Typical house front

Sant Felip Neri

 

 

 

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justice

Thomas Sowell talks about two different definitions of justice:

  • The traditional justice which can be summarized as applying the same rules and the same standards to everybody.
  • And the cosmic justice which means equalizing the prospects of everybody.

If you want the one thing or the other, you can go for it. But the one thing you cannot do is pursue the two things simultaneously.

 

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Nobel laureate Milton Friedman on various issues like the national debt, unfunded liabilities, taxation, social security, and the high cost of medical care:

The fundamental reason why we have high expenses on medical care is because everything is a third-party payment, nobody pays for himself.

You are never going to do all this but it is well to have in mind what you would like to do.

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nobel prize in decline

Three years after awarding Barack Obama the Nobel Peace Prize for no reason, the Norwegian Nobel Committee has once again made an absurd decision. In a world with probably thousands of outstanding people, the European Union was chosen for this year’s Nobel Peace Prize. Let aside the so-called Euro crisis, and neglect the bureaucratic mess, what the EU has caused by its agricultural subsidies alone is worse than most war crimes of the 20th century. But who really cares about poor African people?

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Having spent several years studying economics at a university, most graduates still find it hard to discuss properly current economic policies. This is due to the fact that the subject of economics today focuses mostly on abstract theories and estimation techniques. It mainly consists of mathematical formulas which describe models of limited practical use.

This is not to say that economic research does not deliver new insights into how an economy works. But rather that the study of economics often misses the bigger picture and lacks a profound analysis of various real-world economic policies.

Thomas Sowell has published a brilliant book that addresses this shortcoming:

Basic Economics by Thomas Sowell

In this book, Sowell discusses dozens of policy interventions and economic mechanisms. He does so without formulas, math, tables, or figures. Instead the reader finds plain English text, historical examples and common sense reasoning.

The fundamental theme that runs throughout the book is the definition of economics itself:

Economics is the study of the use of scarce resources which have alternative uses.

Topic after topic, Sowell explains what this simple definition implies and how it contradicts many political statements:

However useful economics may be for understanding many issues, it is not as emotionally satisfying as more personal and melodramatic depictions of these issues often found in the media and in politics. Dry empirical questions are seldom as exciting as political crusades or ringing moral pronouncements. But empirical questions are questions that must be asked, if we are truly interested in the well-being of others, rather than in excitement or a sense of moral superiority for ourselves. Perhaps the most important distinction is between what sounds good and what works. The former may be sufficient for purposes of politics or moral preening, but not for the economic advancement of people in general or the poor in particular. For those who are willing to stop and think, basic economics provides some tools for evaluating policies and proposals in terms of their logical implications and empirical consequences.

While waiting for the delivery of your copy you may want to watch how Sowell himself discusses his book with Peter Robinson:

The problem is not that the profession has not reached a level of understanding. I think if the average citizen understood economics as well as it was understood by economists two hundred years ago, most of the nonsense that is done in Washington would be impossible politically.

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The other day I did some math to figure out the real cost of taxes and social security in Germany. Here is what I got for an average worker with a monthly gross income of 2’500 euro:

The employer has to pay 496.- euro in social security contributions. (As explained recently, this is paid by the employer but borne by the employee.)

Then there is 518.- euro in social security contributions to be paid by the employee, as well as 206.- euro in taxes (income, church, solidarity).

Overall the employee creates more than 3’000 euro in value. This is because the employer would not hire her if the total labor cost exceeded the value created. But out of the 3’000 euro, the employee only gets about 1’775 euro transferred to her bank account. That is, the average worker in Germany with a decent monthly income pays 34% of her value added to social security, 7% is deducted by taxation, and only 59% appears on her bank account. And of course this is only the direct taxation: if she decides to take that money from her bank account and buy something, the usual VAT is 19% (or 7% on food).

The bottom line is that even if you only have a decent income, in Germany more that 40% of your value added is confiscated by the government.

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