Is mankind's highest ideal to live without
incident or adventure? And if so,
when did this begin?

Via “Merle Hazard”:

I’m reminded of economist James Buchanan’s words:

The market will not work effectively with monetary anarchy. Politicization is not an effective alternative. We must commence meaningful dialogue with acceptance of these elementary verities. Far too much has been said and written in elaboration of the first statement, which too often is taken to be equivalent to the assertion that “capitalism” or “the market” has failed. Admittedly claims for market efficacy without qualifiers can be found. But economists should know that anarchy can only generate disorder rather than its opposite

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Via Survival of the unfittest: why the worst infrastructure gets built—and what we can do about it:

[...] Taken together, the UK and US studies both account well for existing data on cost underestimation and benefit overestimation. Both studies falsify the notion that in situations with high political and organizational pressure the underestimation of costs and overestimation of benefits is caused by non-intentional technical error or optimism bias. Both studies support the view that in such situations promoters and forecasters intentionally use the following formula in order to secure approval and funding for their projects:

underestimated costs + overestimated benefits = funding

Using this formula, and thus ‘showing the project at its best’ as one interviewee said above, results in an inverted Darwinism, i.e the survival of the unfittest. It is not the best projects that get implemented, but the projects that look best on paper. And the projects that look best on paper are the projects with the largest cost underestimates and benefit overestimates, other things being equal. But the larger the cost underestimate on paper, the greater the cost overrun in practice. And the larger the overestimate of benefits, the greater the benefit shortfall. Therefore the projects that have been made to look best on paper in this manner become the worst, or unfittest, projects in reality, in the sense that they are the very projects that will encounter most problems during construction and operations in terms of the largest cost overruns, benefit shortfalls, and risks of non-viability. They have been designed like that, as disasters waiting to happen.

The paper goes on to say, “Professional and occasionally even criminal penalties should be enforced for managers and forecasters who consistently and foreseeably produce deceptive forecasts”. Wise words yet we shall have to hope the HS2 project and all the other infrastructure projects planned by the Government are unique in not suffering from the endemic flaws described in the paper.

I’ll leave interested parties to read the paper for themselves but I will add this: while the Government has cloaked itself in the legacy of the great British railway pioneers, they were entrepreneurs risking private capital in commercial projects. The same cannot be said of HS2.

That matters and it matters for all the reasons we have historically defended free societies from the encroach of planning.

Every week over 26 weeks, I’ll be publishing a précis of a chapter of Henry Hazlitt’s brilliant 1946 book, Economics in One Lesson, prepared by Michael Dowsett during his internship. The index page is here.

This week, Public Works Means Taxes, which explains that people forget the unseen cost of political infrastructure projects…

Buy or download Economics in One Lesson.

Via How Liberals Distort Austrian Economics – Reason Magazine:

The earliest Austrian economists did not make their mark by advocating free markets and other classical-liberal ideas. They did so by proffering a revolutionary positive (not normative) theoretical approach to understanding how markets work, focusing on value, price, and capital, theory. …

Yglesias thus conflates Austrian economic theory with libertarian political theory. In fairness, he is not alone in committing this error. Many libertarians do the same, which is unfortunate. Austrian economic theory describes how purposive action by fallible human beings unintentionally generates a grand, complex, and orderly market process. An additional ethical step is required to pronounce the market process good. Economic theory per se cannot recommend but only explain markets. This is what Ludwig von Mises meant when he insisted that Austrian economics is value-free. Anyone of any persuasion ought to be able to acknowledge that economic logic indicates that imposing a price ceiling on milk will, other things equal, create a shortage of milk. But that in itself is not an argument against the policy. Mises assumed the policymaker would have thought that result bad, but the economist qua economist cannot declare it such. As Israel Kirzner likes to say, the economist’s job in the policy realm is merely to point out that you cannot catch a northbound train from the southbound platform.

The whole article is thoroughly readable and recommended.

I recently gave an interview to fraudedocumental.com towards their forthcoming documentary on the crisis. A good number of my colleagues in the UK and Europe will be appearing in the film:

Fraud. Why the Great Recession (Official Trailer) from amagifilms on Vimeo.

One of the stars is Jesús Huerta de Soto, author of the brilliant Money, Bank Credit, and Economic Cycles , which set out, from a sound theoretical basis, the mechanisms of this crisis as long ago as 1998 and which sets out a better way to organise banking.