Posts tagged ‘Tim Worstall’

Economic Morons in Europe, but is Congress Much Better?

Via Tim Worstall, Gawain Towler reports this bill in front of the European Supreme Soviet Parliament:

Written declaration on fixing fuel prices
The European Parliament,"“ having regard to Rule 116 of its Rules of Procedure,
Whereas we are witnessing an unprecedented rise in fuel prices, and
this scandalous surge is having a devastating effect on economic
activity in various sectors: transport and other services, industry,
agriculture and fisheries,
B. Whereas in Portugal, the major oil
companies in the first quarter of this year, vis-à-vis the first
quarter of 2007, made net profits of 22.9% (GALP), and consolidated
profits of 36.5% (REPSOL) and 63.4% (BP), which were fundamentally the
result of practising speculative pricing, as a result of the
speculative valuation of oil stocks
bought at lower prices,

Calls for the establishment of a tax, for each Member State, to be
levied exclusively on these profits so as to bring them back into the
coffers of the Member State. This tax should be paid within 60 days
after the end of each quarter, with the value and scope of the levy
depending on the readiness of the oil companies to reduce their
speculative gains thanks to the 'stock effect';
2. The revenue
generated by this tax should be returned on a proportional basis to the
various economic sectors in each Member State;
3. Instructs its
President to forward this declaration, together with the names of the
signatories, to the Council, Commission, and Parliaments of the Member

"depending on the readiness of oil companies to reduce their speculative gains thanks to the 'stock effect'"??  What the *&#$@% does this mean?  What economic concept are they even trying to get at?

Further, I was amazed at the statement that BP made net profits of 63.4%.  It took me a while to figure out that this was the quarter over quarter profit growth, not the profit margin.  I can't tell if these guys are just ignorant or if this is a translation issue into English, so i will give them the benefit of the doubt.  In case you are wondering, BP's net profit margin in the first quarter of 2008 was 8.3% of revenues, which in the grand scheme of industry is actually below average.

One reason fuel prices are so high in Europe is because the government takes more than half of fuel revenues in taxes:

Fuel taxes are also the central issue for truckers in Europe, because
they account for a large portion of the retail price of fuel. Unleadedgasoline
sold for $8.65 per gallon and diesel for $9.62 per gallon Tuesday in
Britain, which charges a flat $3.77 per gallon in fuel duty and imposes
a 17.5 percent consumptiontax on the total price

So, 61% (44% from the $3.77 plus the 17.5%) goes to government and 8.3% goes to the BP shareholders.  So lets tax BP shareholders more to lower the price!

Minimum Wages and the Supply and Demand for Labor

In a post that is a nice follow-on to this one about wages in trucking, Russel Roberts has a nice post about people making minimum wage:

According to Current Population Survey estimates for 2006, 76.5
million American workers were paid at hourly rates, representing 59.7
percent of all wage and salary workers.1
Of those paid by the hour, 409,000 were reported as earning exactly
$5.15, the prevailing Federal minimum wage. Another 1.3 million were
reported as earning wages below the minimum.2
Together, these 1.7 million workers with wages at or below the minimum
made up 2.2 percent of all hourly-paid workers.

Correcting for higher state minimum wages, but also adjusting for illegal immigrants (who are a special case with super-low bargaining power) and factoring in salaried workers (who by law to be salaried have to be making much more than minimum wage) one still finds that less than 2% or less make minimum wage, about half of whom are under 25.  Roberts has a follow-on post with comments from Tim Worstall to say that even this number may be too high:

Unfortunately, on the page he's taken his information from he's missed one thing which makes his case even stronger.

Nearly three in four workers earning $5.15 or less in 2006 were
employed in service occupations, mostly in food preparation and service

That's your waitron units and barkeeps folks. And what do we know
about people who do these sorts of jobs? Well, perhaps you have to have
actually done them (as I have, everything from the graveyard shift in a
Denny's to tending bar around the corner from this guy's
place): they all make tips. In fact, so much so that there is (or at
least used to be when that BLS report was prepared) a special minimum
wage for those in such jobs, one lower than the official Federal
minimum wage.

For example, way back when, the min. wage was $3.35 an hour. Waiters
got $2.01. You didn't really care because even serving pancakes at 5 am
you made another $25-$30 a shift ($50-$150 in a decent place). Barkeeps
got $3.35 plus tips.

The BLS numbers are reporting what employers paid employees, not
what people are actually earning. So we might in fact say that while
the number being paid the minimum wage or less is 2.2% of the workforce, the number actually earning that figure is more like 0.5%.

As an aside, speaking of bargaining power, it strikes me that prostitution is an excellent example of supply and demand in labor markets trumping government mandates.  Prostitutes have absolutely no power to run to the government for help over minimum wage or work condition violations.  They have only limited power to get government help even when they are the victim of violence from those who pay them.  But on an hourly basis, the most succesful make far more than most Americans.

More of Wal-Mart as Satan

I guess Exxon must be happy that after a really long run, they may finally be handing off the title of the left's great Satan to Wal-Mart.  Ezra Klein thinks government intervention to change the practices of Wal-Mart's managers, consumers, and employees is one of "the two or three most important issues facing the country" (hat tip: Instapundit).

Eegad!  My response in his comments:  "My guess is what is really worrying to you is that there is a large
group of people voluntarily and by individual choice making decisions
you don't agree with (e.g. to shop at Wal-Mart or to work at Wal-Mart)
and you are frustrated that no one has yet allowed you to become
economic fuehrer so that you can override by government coersion the
actions of individuals so you can force them to make decisions the way
that you think they should."

I have pointed out the great irony before that those who call themselves "progressive" are actually inherently conservative, hating capitalism for its chaos and unpredictability.  They hate new business models and often make common cause with incumbent competitors to get the government to halt such new competition (e.g. protection of US auto and steel vs. imports).

Update:  Sabastion Mallaby has an editorial in the Washington Post criticizing moderate Democrats for jumping on the anti-Wal-mart bandwagon

Update#2:  I realized that I forgot my usual caveat in my defense of Wal-Mart:  That is, Wal-Mart totally pisses me off in their rent-seeking from local government, benefiting from tax breaks and even eminent domain actions their competitors do not get the benefit of.  Also, I think their stores are aesthetic hell-holes I enter only under duress.  Wal-Mart has problems, I just don't agree they are the ones their critics harp on.  Tim Worstall's article reminded me I forgot this part.