2005 Blog Archive for Brian Micklethwait
Link to 2006 Archive

	The new language of diplomacy	12 DEC 2005
	France is bad!	05 DEC 2005
	Competition between different social models versus coercive liberalisation	28 NOV 2005
	The EU beats up BSkyB	21 NOV 2005
	Non-competition between national governments and non-competition imposed by national government	14 NOV 2005
	How politics might be fuelling a competitive victory	07 NOV 2005
	"Would tomorrow morning be soon enough?"	31 OCT 2005
	Will Hutton on making Europe uncompetitive in a new way	24 OCT 2005
	Gordon Brown wants economic freedom - or so he says	17 OCT 2005
	The market in bundles	10 OCT 2005
	Don't demand laws enforcing interestingness	03 OCT 2005
	Neelie Kroes: competition as long as …	26 SEP 2005
	New wars - new competition policies	19 SEP 2005
	High definition competitions	13 SEP 2005
	The real competition for Microsoft	05 SEP 2005
	Competition New Labour style	10 AUG 2005
	A political scalp for the British blogosphere	25 JUL 2005
	Saving the book trade from the book traders?	18 JUL 2005
	Competing too much	11 JUL 2005
	Getting rid of the wrong kind of competition	04 JUL 2005
	Antitrust - the triumph of politics over economics	27 JUN 2005
	What makes a nation competitive?	20 JUN 2005
	Cold milk at the Mom and Pop store	13 JUN 2005
	Competition does not need to be centrally imposed	06 JUN 2005
	The EU supertanker is turning	02 JUN 2005
	Apples and rocks do not taste the same and they do not have to	25 MAY 2005
	Competing over the weather	16 MAY 2005
	Avoiding war by avoiding trade war	09 MAY 2005
	A sermon - sugar subsidies - soccer	03 MAY 2005
	Spooks dot com	25 APR 2005
	Competition policy versus competition	18 APR 2005
	EU competition policy has its uses	11 APR 2005
	The Anglo-Saxons - bossing the car industry is now boring	04 APR 2005
	More on the EUrobureaucrassy versus Microsoft	28 MAR 2005
	Price cuts are anti-competitive!	14 MAR 2005
	Ferry foolish	07 MAR 2005
	The global destruction of competition	28 FEB 2005
	Capitalist Balls	21 FEB 2005
	Why are competition arguments so complicated?	14 FEB 2005
	Eason Jordan versus the blogosphere	07 FEB 2005
	A boy thing	31 JAN 2005
	Competition to get at the truth - and to sell airplanes	24 JAN 2005
	Umpires	17 JAN 2005
	Mancur Olson and the potential rise of Europe	10 JAN 2005
	Everything competes with everything	03 JAN 2005

The new language of diplomacy
12 DEC 2005 - In the course of their attempts to bludgeon France into giving up some of its farm subsidies, some fragment of the British Government (the Foreign Office, if I understand things correctly) has leaked an email composed by the British Ambassador in Poland.

The words our Ambassador uses to describe the EU's wicked ways are as blunt as those of any EUrosceptic blogger. The particular phrases that the Times picks out, which have been copied and pasted in all directions, are: "all the bollocky EU bureaucracy" and "sticky transaction costs, local and Brussels corruption, overheads and other rubbish". The language of diplomacy is not what it used to be.

As France continues to ignore all this bluster, Britain is threatening to avoid all the corruption, overheads, rubbish etc., by giving its money directly the Eastern Europeans, rather than channelling it through bollocky Brussels. As threats go, this is pretty feeble. Instead of having our hand chopped off, we will chop off three of our fingers ourselves. So there! Watch out for the Gallic shrugs.

The Eurosceptic blogger linked to above tells the more important story here, in an earlier posting:

Remember last summer and all the excitement that followed the rejection of the EU constitution by the voters of France and Holland? For two years we had been warned, not least by the Daily Mail, that the constitution heralded the setting up of a "European superstate".

At last, it seemed that vision had suffered a spectacular and permanent reverse. The relentless drive to European integration was seemingly at an end. Tony Blair proclaimed that the peoples of Europe had blown their "trumpets round the city walls" and it was time the EU's leaders paused to listen.

You might therefore be surprised to learn that, since last summer, the building of the "superstate" has, in fact, been powering ahead regardless, and on many different fronts.

Will the rulers of Britain, or any other EUropean nation, ever decide that they dislike all this bollockyness enough to shake themselves free of it? Highly doubtful. Will EUrope as a whole ever decide to become less bollocky, that is to say, based less on mutual plunder and less committed to the regulatory asphyxiation into mediocrity of creative business in the interests of big old business as usual? Will EUrope ever wake up and smell the tea of India and China? I used to be more optimistic about that than I am now.

Tony Blair's big EUropean idea was that he would make EUrope do just this, and thereby give the whole world a kick in the direction of free trade. But this big idea is now fading.
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France is bad!
05 DEC 2005 - The British government is talking about abandoning its famous (in Britain anyway) EU rebate, so that the new Eastern EU members can get the EU subsidies they have been counting on, and the British government wants the Hong Kong talks which start on Dec 13th to yield lots of free trade for the world. Poor countries must let in manufactured goods from rich countries, and rich countries must let in agricultural goods from poor countries. The India and Brazil governments (speaking for the poor countries) are willing to do that latter deal. The idea is that the new EU countries will side with Britain about all this, if they get their subsidies. If not, then not.

British Prime Minister Tony Blair wants his place in history, and if that means swapping a few billion quid from the British coffers in exchange for some more global free trade, that will do. That's history. British Chancellor of the Exchequer Gordon Brown, just wants Tony Blair to be history, so that he, Gordon Brown, can be Prime Minister. But both agree that more global free trade would be nice, and that the French must stop getting their farm subsidies.

But France says: we are going to keep our farm subsidies, and the rest of the world can go to merde. British EU Trade Commissioner Peter Mandelson says that Gordon Brown doesn't understand how subtle and nuanced the French position is.

Everything seems to depend on the British government being able to compel the French government to do what the French government is determined not to do. The British plan is to make the French into global villains. Big deal, i.e. no deal. The French will simply announce that they are not villains. Is the idea to sap the will to power of the French elite? This is usually why you call someone a villain. You want to make him doubt his own virtue, and reduce him to a gibbering and confused wreck. (It worked a treat with the elite of the old USSR.) But the French elite have never looked elsewhere for their self esteem. They don't need foreigners to tell them they are great, and if foreigners do not agree, that is their problem. (I am British, and I know just the feeling.)

It is nice, though, that once again the future of the world depends on how Britain and France are doing against each other.

The key to all this is the internal politics of the EU, and the average reader of this blog probably knows far more about that than I do. Can the rest of the EU say to France: we have decided to stop giving you gigantic piles of money in exchange for nothing? I would have thought so. Just ring up the bank and cancel the direct debit. Easy. But apparently that is not how the EU works.
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Competition between different social models versus coercive liberalisation
28 NOV 2005 - In my previous CNE blog posting, I mentioned a talk given just over a week ago now by Syed Kamall MEP at the annual November Libertarian Alliance Conference at the National Liberal Club in London, and I said that it would make particularly good material to link to from this blog. Well now, thanks to the sound-editing skills and industriousness of Sean Gabb, most of the talks given at this event are available to listen to, including Syed's. Click on any of the blue bits here. Syed's talk was at 2 pm on the Saturday.

It took Syed about twenty minutes of tangential chitchat to get to his main point, but these tangents were most entertaining. They dealt with such things as the complications of the EU Parliamentary voting system, the way that the EU continues to foster a dependency culture in former European colonies such as Guyana (where some of Syed's ancestors are from), about the unsocialness of the French "social model", which he blames for the recent riots (what with it being so appallingly hard for a young person of any race or creed to get a job in France these days), and about the easterly expansion of the EU (which he favours despite feeling that it would probably suit Britain to get out).

When he eventually got to it, Syed's main point took the form of a question: Given that I, Syed Kamall MEP, favour "competition", should that be competition between different national systems - between those "social models"? Or should I favour competition between businesses right across Europe, imposed centrally by the government of the EU, steamrollering over all those separate social models and imposing a uniformly free market?

There were three highly pertinent responses from the floor, which neatly summarised the various different answers to be had to this question.

First, Chris Tame, the Director of the Libertarian Alliance, said that imposed reforms like this never stick, if public sentiment is against them. Spread the idea of competition, and of free markets generally, and then let people do it for themselves. Yes that's hard. Yes that takes a long time. But that is what is needed, and anything less will fail. So, go with different social models and forget coercive liberalisation.

Rachel Tingle responded by pointing out that separate national governments often coercively impose liberalisation, and that it often works. To start with, people oppose it. But then when it starts to work they are glad that it was imposed. If you wait for public sentiment to change before you actually change anything, you are liable to wait for ever.

And thirdly, Libertarian Alliance supporter Paul Coulam noted that this debate is not confined to Europe. In the USA, economic liberalisers face the exact same dilemma. If the Federal Government is feeling liberal, should liberals support its imposed liberalisations? Or should liberals favour states' rights, even when states are inclined against liberalisation, on the grounds stated by Chris Tame? Coulam's final point was that in the USA, despite much arguing, no definite answer had emerged, and it didn't look as if it was ever going to. So, play each argument by ear.

Syed reckoned, with no great certainty, that the final answer was probably the nearest thing to a right one. Me: don't know. You: take your pick.
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The EU beats up BSkyB
21 NOV 2005 - From the Times last Thursday:

The European Commission said today that it had struck a deal with the FA Premier League to break BSkyB's grip on the broadcasting of top-flight football matches from 2007 onwards.

After months of wrangling over the satellite broadcaster's monopoly position, the Commission said that the Premier League had submitted "improved commitments" under which it will sell live television rights for the matches in six media packages - and no single broadcaster will be able to buy all six packages.

BSkyB no more had a "grip" on the broadcasting of Premier League football matches than I have a grip on writing a weekly piece for the CNE Competition blog. This is a common error among the enemies of "monopolies" which actually aren't. Words like "grip" and "control" and "own" are used, when all they are really talking about is how much business someone managed to do last week or last year.

Were other enterprises forbidden by law, or prevented by the unlawful use of force or violence, from bidding for the right to televise the British Premier League? Of course not. The only force involved here is in upholding the entirely legal deal that was made.

The idea is that BSkyB televising all of Premier League football instead of merely most of it, as the new arrangement will apparently be, is "monopoly" and hence wrong and there ought to be a law against it. Which makes about as much sense as saying that a major movie star should not be allowed to have only one agent, or that a big building construction project should never be awarded to only one building contractor.

At the root of this idiotic decision, I believe, is the notion that the only enterprise that can possibly be competing meaningfully with another enterprise is another identical enterprise. This is our old enemy here, the misunderstood version of the Theory of Perfect Competition. The truth is that BSkyB's football coverage has been in fierce competition not only with everything else on the telly, but with every other way that people can think of to spend their spare time, from surfing the internet to going on a holiday in the Pacific and surfing the waves of Hawaii, to knitting. Competition is everywhere, and if BSkyB had ever made the mistake of taking their customers for granted they would soon have learned this. Subscribers would have refused to renew. The Premier League would, come renegotiation time, have looked elsewhere for a TV partner.

So, partly this is bad economics. And partly, I believe, it is a power grab for the pure, if that's the right word, sake of it. Nothing is allowed to get too big for its boots in the new EUrope that the EUrocrats are now crafting, and are determined always to dominate. Premier League football on the telly, like Microsoft Windows, is too big. So, it must be smashed into pieces, or at the very least have bits broken off it. And if the people don't like this, which they won't in the case of Premier League football because they will probably end up paying twice as much to get all of it on their tellies, then the people must likewise be shown who is the boss.
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Non-competition between national governments and non-competition imposed by national government
14 NOV 2005 - Two different rows involving the EU are going on just now, and they make an interesting contrast. One concerns tax harmonisation. The other is about transatlantic air travel.

Tax commissioner Laszlo Kovacs wants to impose - although I suppose he would prefer a word like "achieve" - harmonisation in the matter of corporation tax, the first step being to agree just what corporation tax ought to be taxing, there being no such agreement across Europe now. Mr Charlie McCreevy doesn't like this idea. My guess is that in the short run Mr Kovacs will be disappointed, but that in the longer run his view will prevail. That is usually what seems to happen when someone proposes something which will make the EU more like a single bossily governed country and less like a gaggle of quarrelling sovereign states with varying degrees of bossiness.

Whatever. What interests me is that the basic idea here is to impose non-competition. Now, different European governments compete by imposing different taxes and tax rates not just on corporations but on all kinds of other stuff, a notable example being Mr McCreevy's country, Ireland. Mr Kovaks wants that to stop.

Contrast this with the row about transatlantic air travel. Here, what is being attempted is to achieve - or should that be to "impose"? - a state of competitiveness which does not now exist. Here, national governments are stifling competition by adhering to bilateral treaties which restrict the development of cheap transatlantic flights.

I favour competition in both areas. I favour governments competing with one another with their tax regimes, because I am confident that this will result in lower taxes (even though the EU now likes to sell tax harmonisation as imposing lower taxes, on such things as wine imported into Sweden - scroll down in that tax harmonisation story linked to above). And I favour governments allowing competition in air travel of all kinds, because I am confident that this will result in cheaper air travel for all those who want it. I also note that the issues of tax competition and cheap air travel relate to one another, because the more people can travel to faraway places the more chances they will get to buy things where they are less severely taxed.

Usually I favour free markets for rather abstract and ideological reasons, for the good of mankind. Often the only selfish bit is that I like being paid to say such things. But this time, with this air travel argument, for me, it's personal. I have never travelled outside Europe, but if air travel to seriously faraway places were to get seriously cheaper, that will surely change. And I will finally get to see Hong Kong and the Grand Canyon. I want this airline to be able to go global.

I wonder if this airplane has already put more - and will now put even more - pressure on government officials to get this cheap air travel business sorted.

Long live competition, I say.
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How politics might be fuelling a competitive victory
07 NOV 2005 - From The Business Online, I learn that fuel prices in Europe are rocketing and that there is a great clamour for something to be done about this.

I can remember a time when, if government officials were saying that "action must be taken", that action would have been more government spending. Are fuel prices rising? Let there be fuel subsidies! Let monopolistic producers and distributors carry on supplying highly priced fuel, but let people buy it for less than it is costing to supply. That way, Europe "becomes competitive again", but existing fuel producers (and their politician friends) are not inconvenienced.

But this time, things may turn out differently. This time, the supply of fuel in Europe just might be going to be liberalised.

This is a textbook example of how ideas matter, and of how, when they do matter, other things besides ideas also matter.

First, the idea quietly spreads among top government officials that markets are good, work well, yield more tax, etc. So, they install a rule about not allowing subsidies. Nobody else worries, because they aren't going to need to be subsidised. No, no. Subsidies are for other people. Not for profitable, virtuous, productive persons like us. So, no objections to that rule are made, other than from those already receiving subsidies, and deals are duly done to square such objectors, fudges are duly fudged.

But then, a crisis! Fuel suddenly becomes more expensive.

Politics is done, always and everywhere (that is only a bit of an exaggeration), either when a comfortable way of life is disrupted, or when there is a financial killing to be made by somebody in particular. Only if there is disrupted comfort or the prospect of vast gain are there any particular people actually to do the politics, actually to demand the action. This was why the no subsidy rule was not fiercely enough opposed in the first place. Nobody in particular felt sufficiently threatened by it. For politics to happen, there must be clearly visible triumph and/or disaster coming right at people who can clearly see it coming, soon.

So, fuel prices are rising terrifyingly and disaster looms, for thousands of businesses, for millions of households, for thousands of politicians, all of whom demand action.

But at this point, the subsidy option has become not only intellectually unappealing, but worse, far worse, politically inconvenient, what with it now being rather, you know, illegal and all. So, a free market in fuel might just be the least inconvenient kind of action available to the politicians to bring fuel prices down again.

That The Business article is by a certain Phil Bentley, who works for a now relatively small fuel enterprise of just the sort that could make a killing in such a liberated European fuel market. So he too has found the time to do a little politics and to write his little article. Which I recommend.
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"Would tomorrow morning be soon enough?"
31 OCT 2005 - Reading Cecile Philippe's recent TCS piece about monopoly and competition got me thinking about one of my most vivid experiences of a monopoly in action.

At the end of the 1980s I had just moved into a new flat. I had one phone line, but needed another, for a fax machine. (Faxing had sprung to prominence during a postal strike. The letter delivering monopolists thought that they were the only people who could transmit written messages. They were wrong.)

So, could I, please, if it's at all possible, and I realise that this is a very impertinent thing to be asking about, please have another phone line?

"We're very busy just now", he said.

Here we go, I thought. At that time, all kinds of rumours were flying around London to the effect that in order to get a phone line connected in less than a month, you had to be the brother-in-law of the Post Office Minister. German banks which had just built their headquarters in London were said to be about to move back to Frankfurt, because they just could not get enough phone lines to do their business. Bribery was no use, apparently. The telephone people didn't care about money. You just had to wait your turn. Maybe I should move to Frankfurt.

However, Mrs Thatcher had been busy, and the telephone system had recently, with much fanfare, been "privatised". But although in theory, as a good little libertarian, I welcomed that, I didn't expect that to make any immediate difference in the real world.

"How soon do you want it?", the telephone man continued.

Well, I said, very politely: as soon as you can conveniently do it.

"Would tomorrow morning be soon enough?" he asked, anxiously.

That was the moment when I fell in love, politically speaking, with Margaret Thatcher. Suddenly, instead of dealing with people who were paid by the year no matter how much or how little useful work they did, I was talking to a man who was being paid according to how many phone lines he managed to install, so that his bosses could preside over an ever busier phone system, and hence one that was ever more lucrative to their greedy selves and to their greedy shareholders. The desire to make "loudsamoney" (to echo a comedic catchphrase of those times) had taken London's phone line installing system from: "I really couldn't say, maybe six weeks, maybe longer", to: "Would tomorrow morning be soon enough?"

Since that happy moment, telephone services everywhere have become ever more competitive, and I daresay the prospect of such competition did further energise those phone installers. But fixing things so that they could make a ton of money was the turning point. What makes monopolists really pernicious is not their monopoly, so much as their unwillingness to exploit it.
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Will Hutton on making Europe uncompetitive in a new way
24 OCT 2005 - Will Hutton writes gloomy books about the ravages of globalisation and denounces capitalism for being short-termist. In the far off days when Japan looked to be heading for world economic domination, he urged us Anglo-Saxons to copy Japan and to introduce crony capitalism to the Anglosphere. We need, he said, a system which panics less when things go wrong. The world now knows that when things started to go wrong in Japan, Japan could have used a system that panicked a bit more and bit sooner.

In the latest Observer, Hutton talks about the state of the EU, concerning which he is characteristically gloomy:

The No votes in France and Holland on the EU constitutional treaty have left the 25-member EU without a workable system of governance. They have created, particularly in France, a political dynamic that opposes head-on the so-called Anglo Saxon liberal worldview that allegedly wants to dismantle Europe's social achievement and open up every European industry to the full blast of unfair global competition.

This, say the French and their camp-followers, is the not-so-hidden agenda of a lightweight EU Commission and its British ally; they are Trojan horses with the hidden mission of wrecking Europe. The mood is ugly, the divisions run deep.

Concerning Gordon Brown's position paper, which I wrote about in my previous posting here, he says:

Suppose he had suggested that in return for agreement to reform the Common Agricultural Policy and redirect higher EU spending on research, universities and education he was prepared to consider lowering the famous British budget rebate. The impact would have been electric. At a stroke Britain would have emerged as the EU's galvanising leader - a catalyst to reshape the continent.

But whenever the public sector, any public sector, decides to spend more on A by spending less on B, the A stuff duly happens, but the B stuff has a habit of carrying on regardless, and twice as much ends up being wasted.

Perhaps Hutton is a Trojan horse with a hidden mission to wreck Europe.
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Gordon Brown wants economic freedom - or so he says
17 OCT 2005 - Gordon Brown, Britain's Finance Minister, has been thundering. Or squawking impotently, I can't tell. His latest production is entitled Global Europe: full employment a bold exercise in laying out the new competitive policy for EUrope, or just the last mewings of the British kitten before Britain is finally drowned in little EUropean statism and the permanent economic decline that will accompany it. Is Brown saying what EUrope will do, or merely crying vainly about what it should do? I wish I knew.

The Brown message is that the old idea, of EUrope having a free internal market but surrounding itself with barriers against the rest of the world, is doomed. Wake up, and, as this Telegraph piece puts it, smell the tea from China. And indeed, the most vivid thing in Brown's pamphlet/policy-document/impotent-howl-of-rage is the pie chart at the bottom of page 4 which shows the massive recent growth in share of world economic output achieved by China. (Incidentally, this also shows that the Chinese achievement dwarfs the massively impressive, by any other standards, recent achievements of India, just as this man says.)

There are also some inconclusive references to higher education, entrepreneurship, unemployment, etc., which suggest to me that the role of education in promoting economic achievement is pretty much random, although apparently not to Mr Brown.

Those meanderings aside, I strongly agree with what Mr Brown says about the World, China, Europe, etc. I further believe that what major politicians say does count for something, whether they mean it or not, and whether they have a prayer of doing it or not. Why else would powerless little me keep churning out powerless words the way I do?

Nevertheless, my problem with Mr Brown is that what he has been doing to Britain for the last decade - basically wrecking the British economy slowly enough for people not to notice - does not indicate a man who really believes in economic freedom, any more than do the panjandrums at the ever-faltering heart of Europe. Unlike them, he can do you a lovely economic freedom screed, but then he goes home and imposes another sneaky little tax on us Brits, or else makes an existing sneaky little tax just that little bit more complicated, and you wonder whether there is anything more to what he says or does than a desperate yearning to be the next British Prime Minister, by saying the things that one lot of British people want to hear, and by surreptitiously doing the opposite things that another lot of British people want done.
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The market in bundles
10 OCT 2005 - As attentive readers of this blog will long have known, the EU is locked in permanent battle with Microsoft. Not long ago, the EU ordered Microsoft to "unbundle" its Windows software, by offering a version of Windows that does not include Windows Media Player. Including Windows Media Player automatically is, said the EU, "uncompetitive".

But Times Online now reports that in the UK, computer retailers are shunning the new EU version of Windows, the one without Windows Media Player, and are sticking with the bundled version:

Alistair Baker, Microsoft's UK managing director, confirmed that no computer manufacturers had adopted the product since its launch four months ago.

Big retailers also seem unwilling to stock the new version of Windows. PC World, a sister brand to Dixons, stocks only the original Windows version.

Asked whether retailers had bought supplies of the "unbundled" Windows product, Mr Baker said: "I don't know if it's true to say they haven't bought any (but) I'd be very surprised if we've sold any."

Businesses don't just compete by selling individual products. They also compete in offering different packages, different combinations, different bundles. You can buy the complete collected works of Shakespeare in one big book, or individual volumes each with one separate play, or bigger volumes with all the history plays or all the comedies or tragedies. You can buy the entire output of Abba, or a few CDs of the biggest hits, or separate CDs of each of the original LPs. When it comes to computer hardware, you can buy all the bits to assemble your own personal personal, so to speak, computer, or you can buy the whole thing put together by someone else. My big boxy computer has a keyboard which is separate, and which, because I wanted one that was really small and which would leave me more desk space, I actually purchased separately. Portable computers have their keyboards built in. And so on.

The opinions of EU bureaucrats about exactly what computer software ought to be included in a computers bundled software package are worthless and annoying. What do they know? Luckily, the market is still allowed to reject these opinions, and it would appear that this is exactly what it is now doing.
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Don't demand laws enforcing interestingness
03 OCT 2005 - If you are a small and rather inefficient specialist shop, facing large and more efficient competition from something like Tesco, you will grab any excuse to try to convince politicians that there ought to be a law against it. Tesco, that is to say.

Neelie Kroes: competition as long as …
26 SEP 2005 - I have tended to leave the workings of the minds of Big EU Cheeses to my colleagues here. Neelie Kroes is only a name to me. But I am not proud of this, and this posting is my belated attempt to correct some of this neglect.

I have been reading this speech.

One of my many Micklethwait's Laws, original and borrowed (you can only ever find screwdrivers of the other kind - nothing ever happens in rooms with matching chairs - any organisation which builds itself a brand new custom-built headquarters is about to collapse into uselessness and ruin, etc. etc.), says that no politician states a clear principle without following it with the word "but". With Kroes, for "but" read "as long as". Kroes favours competition, as long as ...

I like aggressive competition - including by dominant companies - and I don't care if it may hurt competitors - …

… as long as it ultimately benefits consumers.

That is because the main and ultimate objective of Article 82 is to protect consumers, and this does, of course, require the protection of an undistorted competitive process on the market.

Kroes favours competition, as long as there is no "long term" harm arising from short term price cuts. As long as there is no "foreclosure". As long as there are no "exclusionary abuses"? As long as there is no "bundling". (This is the crime that Microsoft is particularly accused of. You mustn't refuse to sell cars without wheels.)

Kroes likes low prices, as long as:

However, low prices and rebates are, normally, to be welcomed as they are beneficial to consumers. So how do we decide what should properly be regarded as "competition on the merits" when it comes to price based conduct?

The speech concludes with this masterpiece - given what has preceded it - of self-parody:

What I have summarized today is our search for sensible "rules" that would enable us to reach preliminary conclusions about when conduct may exclude competition, yet at the same time allow companies to know when they are on safe ground. Such an approach would have the advantage of being based on solid economic thinking while at the same time giving clear indications to companies and maintaining workable enforcement rules. This is of course only a first step. We intend to go on and review the other categories of abuse.

Maybe I am maligning this woman. Maybe she inherited a system that was clear, and clearly destructive of everything that is good and sane and productive, and she is squirting sewage at it. In which case good for her.

But...
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New wars - new competition policies
19 SEP 2005 - General Sir Rupert Smith, a big British Army and NATO name but not one I had heard of until yesterday, has written a book. He agrees with me (see an earlier posting here), that nuclear weapons have made all-out war unthinkable. This means, he says, that a soldier such as he is now involved not in tests of destructive industrial strength, but of popular political will. Our system is nicer than the system those bad other guys are selling you. Winning a war means winning that argument. You don't win conflicts like the one now raging in Iraq by building half a dozen more aircraft carriers. Driving a tank through the streets of Baghdad doesn't communicate normality and calm, it communicates crisis. It creates crisis.

You win wars now by having a coherent political strategy, and by making sure that all your soldiering is done in accordance with and in order to further that political strategy.

Towards the end of this interview, Smith says very interesting things about the relationship between the military and the civilian economy:

"If this were not enough for the top brass to chew on, Smith says the hardware will grow increasingly unaffordable so they will have to adapt commercial equipment to military ends: "There are no longer budgets for arms manufacturers to keep production lines rolling. They will build a certain number of fighter aircraft to meet specific orders. There is no longer an industrial military machine and, even if there were, it would be a target of weapons of mass destruction.

"So the military will have to buy equipment from the commercial sector. Already electronic technology in the private sector is more advanced than anything in the military world." Our equipment can be civilian because our enemy will also be civilian. In the battles ahead we will seek to gain information, not territory."

In the bad old days of the twentieth century, entire swathes of national economies (agriculture, shipping, automobiles, aerospace) were kept going with state aid and state-imposed protections, so that if an industrial war ever came along, each side could hold its own in it, by having its own food, ships, lorries, airplanes. But if Smith is right, those days are, or should be, gone. Industrial war gives rise to "industrial policy", i.e. all the rubbish that we here are trying to get rid of. So, now that industrial war is over, where should that leave industrial policy?

If only because of the impact that what Smith says will have in provoking good competition policies rather than stupid ones, let us all hope that he is right, and that his ideas prove influential.
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High definition competitions
13 SEP 2005 - There is another battle of the gauges going on, like the one about railways, or the one between VHS and Betamax. This latest battle, which I was reminded of by a TV news report over the weekend, concerns the standard for high definition television discs. I can't now find the story I saw, but there are plenty of other descriptions of this battle to be read.

HD-DVD discs are easier to make with existing equipment, which may give them a good start, but "Blu-ray" discs are more capacious, which may enable Blu-ray to overtake HD-DVD later. Blu-ray is backed by Sony, so there is already a ton of content - games and movies - ready to support it. Take your pick. Actually, don't take your pick. Wait until everyone else has taken their pick, so you won't be stuck with the twenty first century version of a cupboard full of Betamax tapes. Meanwhile, the good news is that, as with VHS versus Betamax, the market is being allowed to decide.

High definition television will make cinemas even less attractive than they are now, because soon every home will be a cinema. A good cinema.

But what will these home cinemas show? One the face of it, Hollywood is not threatened by this battle; it just needs it to be settled. But now read this article, by none other than Glenn Harlan Reynolds, aka Instapundit, about the rise and rise of amateur and semi-pro movie making. Watch out Hollywood, says the prof.

Hollywood is trying to hobble new methods of internet distribution, says Reynolds, that will find their fullest expression in many-to-many networks of amateur and semi-pro movie makers, by saying that these are really just networks for the distribution of stolen goods which should all be shut down. Hollywood thinks that this is an issue that should to be discussed exclusively at such places as, e.g., the CNE Intellectual Property blog, but Reynolds reckons that an equally proper place for this argument is here at the CNE Competition blog, competition what Hollywood is here trying to suppress.

These amateurs and semi-pros will definitely be using the new high-definition media.

The latest trend is toward high-definition cameras. Sony's HDR-FX1, which sells for $3700, is as popular with pros as it is with amateurs.

So, high definition content will (a) further weaken cinema distribution, and (b) strengthen the hands of the amateurs and semi-pros. For Hollywood, the news about business as usual continues to be bad.
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The real competition for Microsoft
05 SEP 2005 - Microsoft and Google are not best friends:

Microsoft CEO Steve Ballmer vowed to "kill" Google in an expletitive-laced, chair-throwing tirade when a senior engineer told him he was leaving the company to go work for Google, the engineer claimed in court documents made public on Friday.

Basically, he said, a new way of doing computer work is emerging. Instead of running personal software (mostly supplied by Microsoft) on our own personal computers, we are switching towards using software (mostly not supplied by Microsoft) that instead runs on a server. We merely access it via the Internet.

Welcome to the world of web based applications. I remember about ten years ago reading that the world would move away from personal computers with huge hard discs, towards a world where our information and our regular software would all be stored elsewhere. And I dismissed this idea with scorn. What, surrender my personal stuff to an impersonal machine? Never. Yet now, the software for my personal blog, and for the other blogs I write for, doesn't run on my computer. It runs on computers out in Internet-land. Yet, I can still access all that I have written. So, I am now starting to be the embodiment of the prophecy that I had rejected. Alex was explaining to me what I was already doing.

And this is where the real competition for Microsoft is now coming from, said Alex. Not from Linux, or the Mac, or from any other way to run software on personal computers in the same way that Microsoft software also runs on personal computers. The competition for Microsoft comes in the form of computer work being done quite differently.

The Microsoft nightmare is that with the Internet, it doesn't matter what personal operating system you use. You no longer have to be using Microsoft Windows to be plugged into the global village. The internet does this for you automatically.

Which means that the idea that Microsoft must be hobbled by competition laws such as those hurled at it by the EU is foolish and superfluous.

This reminds me of how the politicians went after IBM, just at the time when building big bespoke hardware and big bespoke software to run on it was ceasing to be how things were done, and Microsoft was rising up to replace IBM as the Big Bad Computer Monopolist. Now, Google, the masters of the new way of doing things, are rising up to topple Microsoft.

Have I explained all that properly? If not, no matter. Alex Singleton has now written an article explaining it all himself. It is one of the best for-dummies explanations of an important moment in technological and business history that I have ever read.
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Competition New Labour style
10 AUG 2005 - This article in the Guardian about the newly apppointed boss of Britain's Social Market Foundation is interesting in all kinds of ways. It is interesting to me because a couple of the grand New Labour personages mentioned in it, Philip Collins and Matthew Taylor, are people whom I have actually met, and with whom I shared a dinner table several times a few years ago. Both struck me as good men - as well as clever and formidably successful and effective men at the level of personal career advancement. If either of them was putting on an act about being good, it was a class act.

What these men and women are trying to do is to "reform" British state services to the point where these services resemble the best of what free enterprise offers, yet, somehow, without the result being plain old free enterprise, of the kind you only get goodies from if you pay for them and sometimes not even then. They are mixers of the mixed economy. They want state services which are both competitive, and of a government guaranteed level of excellence.

They get attacked from both sides of the political spectrum. Old Labourites denounce them for trying to sneak the free market in through the back door. And if free markets are so great, pure free marketeers such as I ask, why we should not just have a free market? Voters just want the maximum of goodies for the minimum of cost to themselves, so they'll always grumble.

For me, the trouble with "competitive public services" is that at some point the payer of the bills, the Government, has to decide how much money shall be spent on these or those struggling or dazzling school pupils, life-threateningly ill hospital patients, distraught victims of crime, or other supplicants for massive slices of a finite cake of state-financed care. And the Government also has to decide which suppliers - or insurers, one of whom everyone has to choose (if that was your plan for mixing the economy) - are or are not appropriate people for Government money to go to. It has to pick good teachers, skilled doctors, incorruptible and energetic policemen, honest insurance companies which pay out when the going gets rough. There is no automatic way in which it can dole out money without worrying about it and get guaranteed results, because if it does pay out thoughtlessly, many suppliers will compete by taking the money, but then not doing the work properly or not paying out what are by any reckoning decent premiums. The Government has to get involved. There has to be an element of nationalisation.

Either the system truly embodies the right of people to spend more, or less, of their own money, in which case those Old Labourites are right and this is back-door free marketeering. Or I am right and this is back-door nationalisation. This uncertainty has turned out to be a politically brilliant strategy, because no one really knows which it was until years later. But perfectly Government supervised and perfectly competitive public services? No way.
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A political scalp for the British blogosphere
25 JUL 2005 - A key moment in the history of the internet in Britain has just happened, or so it seems to me. A British blogger has just claimed a British Mainstream Media Scalp. Not a very big scalp, but a scalp nevertheless. This sort of thing used only to happen in the USA.

Basically, the Guardian hired an Islamist terror propagandist, either because it didn't know what a nasty piece of work he was and remains, or because it did but didn't care. A British blogger, Scott Burgess, spelled out who the guy was and is. Fearing, rightly, that the blogosphere would not let this story die until the Guardian ended it by firing the guy, the Guardian fired the guy.

But it did so with such bad grace that it left itself wide open to further criticism.

In Britain, the blogosphere has not had very much visible political impact, but this story suggests that things may now be changing. I have previously hypothesised that the British blogosphere has not counted for much politically because the British mainstream media are sufficiently rowdy, varied and unpompous to be less obvious and easy targets for blog-attacks than in the USA, or in France. But maybe the British blogosphere has just been too full of people like me (opinions and comments on media stuff but not strong on fact checking and then confrontation with the big boys based on it), and not full enough of people like Scott Burgess.

What this little drama means is that the British Mainstream Media will now be that little bit keener on hobbling the Internet, which in practice means arguing that the United Nations should hobble the Internet, because the Internet, like socialism, is not something which is easily done in just one country. Here is a piece by me about the Chinese effort along these lines, and here and here are a couple of UN/internet Samizdata pieces.

As readers of the blog do not need to be told (but it will bear endless repeating anyway), if something is competing with you, you can either compete back like a gentlemen, or set the law on it. And if that something is the internet, then the law has to be international, because nothing less will do the trick. Expect a lot more of such talk in Britain in the near future, from the British mainstream media generally, and from the Guardian in particular. Not from everybody at the Guardian, because many people at the Guardian are extremely blog-savvy. Mostly from the blog-unsavvy politicos.

They won't mention Scott Burgess by name very much. But he is now, in their minds, the personification of everything that they now want stopped. And interestingly, commenter number one on the first piece linked to Scott Burgess as the Man Most Likely To . . . do exactly what he has now done.
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Saving the book trade from the book traders?
18 JUL 2005 - I recently bought a book called Saving Capitalism from the Capitalists, by Raghuram G. Rajan and Luigi Zingales. The subtitle reads: "How Open Financial Markets Challenge the Establishment and Spread Prosperity to Rich and Poor Alike", which tells you where these guys are coming from. It looks good. The price on the cover says £25, but I only paid £4.99, and it is book pricing rather than this particular book that I want to ponder now.

In Britain, in 1964, re resale or retail price maintenance was made illegal. But this new law did not apply to books.

My libertarian prejudices tell me that a law forbidding such price "fixing" is just plain wrong. If a producer makes a product, he should be allowed to supply that product to whomever he wishes, and to cease from supplying that product for whatever reason he chooses. Simply: it is his product. Price maintenance may be bad for business, but that should be for business people to worry about.

As for books, if a publisher sells a copy of a book to a retailer on the understanding that the retailer will sell the copy of the book to a customer for £25, or failing that will return the copy of the book to the publisher, fair enough. And if the retailer breaks that deal by offering a price cut, and the publisher finds out about that, then the publisher should be free from then on not to supply any copies of his books to that retailer.

In Britain, this used to be the rule, and it was especially the small bookshops which liked it. When this "Net Book Agreement" finally collapsed in 1995 (through what combination of legal and/or commercial pressure I have yet fully to discover), what the small bookshops feared happened. Big chains piled books high and sold them cheap. Three books for the price of two! Fifty percent off! Many small booksellers shut down or sold out to the big chains.

The kind of shops that cut from £25 to a fiver, on a random pile of books that publishers had failed to shift for the full price, have always existed. (I found my Rajan and Zingales book in such a "remainder" shop.) It was the smaller cuts, by regular bookshops and by other sellers of books who surged into the new market, that the publishers resisted, but then stopped resisting.

The effect of these changes is hard to be sure about, but Rajan and Zingales would probably approve. The collapse of the Net Book Agreement, they would probably say, has saved the book trade from the book traders. If the alternative to a cosy insider club is "competition policy", then good for competition policy.
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Competing too much
11 JUL 2005 - Whenever an American complains about American business culture being too competitive, my prejudices immediately kick in and tell me that he thinks competition is so bad - and "cooperation" so very, very good - that he wants a law forbidding the former and compelling the latter. Instead of Americans behaving like Americans, he presumably (and sometimes explicitly) thinks, they should instead do their business like they do in Japan and Europe, with big clumsy, politically well-connected cartels. These being the reason Japan and Europe are doing so much better than the USA these days.

However, this Boston Globe article, by Robert Weisman, based on a "provocative new report" (Weisman supplies no link and nor can I) by Charlie Hoban and Adrian Slywotzky, has somewhat changed my mind about this. I am still suspicious, but maybe some of the people who write these "America competes too much" articles have a point.

Hoban and Slywotzky favour cooperation in some areas between US businesses, but continuing competition in other areas, and the overall thrust of their work seems to be that companies compete most successfully when they know when to put competition to one side and to cooperate with one another, for instance on costly new technological developments, like new kinds of engines for cars or trains. American companies, say Hoban and Slywotzky, are sometimes too ready to go their own way with high-tech research programmes, when they would do better to buy such technology from their rivals.

Weisman's final two paragraphs convince me that there is a real issue here:

One issue for companies open to collaboration is learning not to run afoul of the US government, which frowns upon ''collusion" by corporations in a single industry. Hoban said teaming up with competitors will draw the wrath of federal antitrust regulators only if it involves the sharing of pricing information - that is, price fixing - or other actions that might prove harmful to customers.

''Some companies say, 'We can't have conversations with competitors about prices, so we don't talk to competitors,' " Hoban noted. ''There are a lot of industries where playing the game the same old way - competing, competing, competing - is feeling a lot like a treadmill."

Getting rid of the wrong kind of competition
04 JUL 2005 - The British media have been saturated over the weekend with Live 8 coverage. Live 8 certainly made a global impact in Britain, and maybe in some places elsewhere.

I am gratified at how much the argument about helping Africa has moved on from the simple notion of merely drowning that unhappy continent in bank notes. In the original version of Live Aid, the emphasis was all on collecting money. "Give us your f***ing money!" as Bob Geldof put it. This time around, although Tony Blair is talking in public only about doubling the aid from the rich countries to Africa, others are taking the chance to say that chucking money at poverty won't necessarily make it history. The talk is instead of politicians "taking action", which is a backhanded acknowledgement that mere people taking action, by donating fivers with no strings attached, won't work.

We non-believers (Live 8heists?) go further. The idea is spreading that giving aid to corrupt and incompetent African governments is liable actually to make things worse. See also the Bob Geldof quote I commented on here, and see More Aid, Less Growth. This report was referred to by Allister Heath, who was linked to from here by Alex Singleton. This, by the President of South Africa's brother, is also getting lots of attention.

Dr Madsen Pirie of the Adam Smith Institute noted that British Chancellor of the Exchequer Gordon Brown understands how hard the CAP hits poor countries, and comments:

All the pious talk of aid misses the point. Poor countries can climb out of poverty by selling their produce. The twin barriers of tariff walls and subsidies thwart them, and all the drib-drabs of aid will never alter that. They don't want managed trade, with approved producers given artificial prices in protected markets. They want access to our markets and an end to unfair competition.

The world is gradually moving the right way, with more globalization, more free trade, and more recognition of what poorer countries really need (markets and the end of subsidies).

Antitrust - the triumph of politics over economics
27 JUN 2005 - Just how big does it makes sense for an economic enterprise to be? At what point are economies of scale and the benefits of sophisticated, perhaps continent-wide organisation outweighed by the dangers of bureaucratic bossiness of and unresponsiveness to the individual customer? As a libertarian (or to put it another way: one of the many reasons that I am a libertarian is that) I believe that the best person to decide such questions is: the customer.

A multinational corporation may be vast and vastly wealthy. But if I decide not to buy one of its products, and to buy instead, say, something a little more expensive but a little more appealing, maybe produced locally and with ingredients and with qualities, like more friendly service, that I find lacking in the product of Megacorp Inc., then all that matters to me is that I am allowed to make this choice. There is no need for any law putting Megacorp Inc. at a disadvantage by forbidding it to make, price and sell its products as it wishes. If there are such laws, I lose out, because often the Megacorp product - cheap and cheerful, but also good at three times the price - is the one I much prefer. Yet such anti-business-bigness laws abound. They have long existed in the USA, and the EU is now busily recreating them for Europe.

In the USA they call them "Antitrust" laws. They arose in the late nineteenth century, not because consumers were angry at the shoddiness of the products of the vast new industrial organisations that were being put together by bold entrepreneurs during those decades, but because the smaller competitors that these big "Trusts" were competing against were angry at how well the Trusts were doing, increasing quality and availability while simultaneously causing prices to nosedive. Antitrust laws were the triumph of politics over economics. They were the result of many small organisations being unable to compete with fewer large ones, and using their numbers to try to achieve with laws what they could not achieve in the market.

If you want to learn more about this sorry story, I recommend reading the latest Economic Note from the Institute Economique Molinari, entitled Inside the history of Antitrust: special interests unleashed. (Click ici if you want a French version.) Key quote, from towards the end:

. . . From its very origin until today, antitrust legislation has been used either by governments or inefficient producers as a protectionist tool hampering innovative companies and consumers. This is not an undesired and unfortunate consequence of well-intended plans for consumers' protection. It is the basic idea behind antitrust policy . . .

What makes a nation competitive?
20 JUN 2005 - I have not read The Power of Productivity by William W. Lewis, but I have just read this interview with Lewis done by Nick Schultz. Even this is somewhat long, but it is well worth a complete read.

Lewis' central message is that there is more to national competitiveness than merely making stuff for export efficiently. Japan makes stuff for export very efficiently. But even back in 1990 when Japanophobia was rampant in the West, the USA was actually way ahead of Japan, because the service sector in the USA was, then as now, much more efficient. The key variable is whether it is easy to build out-of-town megastores, Wal-mart style, and in Japan this is very hard. It seems that Mom and Pop stores are a very big deal when it comes to national competitiveness, because it matters a great deal just how much a country still depends on them. So my exhausted ramblings last week about cold milk were right on the money!

The other big issue that Lewis homes in on is what he delicately describes as "informality". In an economy where the local operators are all breaking the law, international corporations who might want to set up shop there find that if they obey the law (as they tend to want to) they can't make any money. So, they don't bother. Which means goodbye to all those efficiencies that international corporations bring with them. So the stuff that I and my CNE IP blog colleagues write about here, in postings like this, is also central to national competitiveness.

Lewis brushes aside education, in the sense of workers needing to be super-educated to be super-productive. Businesses who can do world class productivity can do it with anyone, anywhere. Japanese car companies can produce just as efficiently in the USA as in Japan, despite the failures of US education and the alleged doltishness of US workers. Mexican building workers in the USA are four times as productive as identically educated Mexican building workers in Mexico. (From where I sit, I note that the British economy has recovered from near disaster in the 1970s to European leader now, at just the time when our education system - in particular the teaching of reading - was at its worst for about a hundred years.)

However, I think that Lewis somewhat overstates the irrelevance of education. Yes, flooding your country with pointless PhDs does no good. But having a basic national grip on literacy, or not, is the difference, I would say, between Asia and Africa right now.

To put it another way, mass illiteracy dooms a country to remaining in a state of incurable informality, as Lewis would put it. Mass literacy at least means that your country has the chance to do better.
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Cold milk at the Mom and Pop store
13 JUN 2005 - Last night, I returned exhausted from a trip to France, but had then to drag myself out again, to buy milk, milk that (in my first cup of coffee of the day) I am now drinking, in my pyjamas. Last night was Sunday and the supermarket was long shut so I had to take my chances with one of the small Mom and Pop stores nearby.

Mom and Pop stores abound in France, because employing people in small numbers in France is damn near impossible and only works if you get economies of scale by employing them by the thousand and if you are big enough to be able to influence the politicians. So France doesn't have small businesses of the ten-employees sort, although my French hosts told me that new French Prime Minister Dominique de Villepin is trying to change this.

Anyway, back to my milk. Ten years ago, milk purchased in Asian Mom and Pop stores was notoriously prone to go sour after half a day. This was because Asian Mom and Pop stores liked to 'save' on electricity by not actually keeping their freezer units in any state you could call frozen. The only thing in Asian Mom and Pop store freezers that actually worked were the lights, which cooked the milk instead of keeping it cold.

So, I have tended always to buy milk in supermarkets. And if that means getting there before they shut on a Sunday, then I do it.

Once a supermarket gets you inside its doors, it knows all about how to sell you other things. The stuff there is much cheaper than in Asian Mom and Pop stores, so once you are there and have decided to brave the supermarket queue (which is the real price you pay for supermarket shopping), you might as well make it count. (Economies of scale again.) So simply by getting one essential product (cold milk) right, the supermarkets have - if my shopping is anything to go by - greatly increased their business.

But, that genuinely cold milk that I bought last night could mean that my shopping habits are about to change. Not completely, because I will still go to the supermarket, but enough to make a difference. And if that happens, will I be the only one?

It's important to write here about trade wars and trade agreements and EU competition policy, and other such grand and easily linkable-to things. But competition is also about the little things.

As the Tesco slogan has it: "Every little helps".
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Competition does not need to be centrally imposed
06 JUN 2005 - In the early hours of Monday morning, I watched a BBC TV debate between EUrophile David Aaronovitch, and EUrosceptic Janet Daley.

The EU supertanker is turning
02 JUN 2005 - If the EU Referendum blog is right, then the two No votes, from the French on Sunday and from the Dutch today - I'm writing this on Wednesday morning - will decide nothing. The EU will grind on, because it is the European Council who will decide about the ratification of the Constitution, and they will decide to continue. There will be a British referendum, says the EUR blog, and they fear that it will be a Yes.

But these two No votes, and the potential British Yes also, do illustrate something, which is that the EU is indeed starting to become a machine for seriously imposing free trade and competition, as well as just immense mountain ranges of regulatory nonsense. The people of France and of Holland now feel like the provinces of a superstate that they already are, and it is the liberalising stuff they object to, at least as much as all the regulation.

The British are about to get the Presidency, and if Tony Blair's words are anything to go by, he wants to turn the EU into a machine for imposing free trade, global competition, deregulation, etc., no matter what the French may have voted. There will be a period of reflection - i.e. about a fortnight of public silence - and then it will be business as usual. Increasingly, the business of Europe is becoming business.

The basic idea of Europe is to be a superpower in a world of superpowers, and the business of Europe used to be assembling itself into a potential superpower, at no matter what cost in truth or treasure. The first step was to assemble the bits. That has now, mostly, been done. But now the EU supertanker, having been built, and launched in a direction determined by its manner of construction, is turning. The job now is to make the potential superpower actually more powerful. The truth will continue to suffer, but treasure will be the whole point. That requires, as Tony Blair says, a major change in what is imposed. During the assembly phase, what was imposed was whatever needed to be imposed in order to lock everyone in. Now that almost everyone is locked in, what must now be imposed is some economic dynamism.

That was what France was voting against last Sunday. Now, French statists and corporatists face the agony that British free marketeers have long faced. Do you leave in disgust, or stick in there and try to screw up what it is and to make it instead more into what you want? The French will stay. Their vote will go down in history as a very interesting, and presumably fairly accurate, opinion poll. The EU Constitution can be summarised very easily: we, the rulers of the EU, can do whatever we want. This Constitution has long been in place.

Apples and rocks do not taste the same and they do not have to
25 MAY 2005 - The havoc caused to actually existing competition by a misunderstood version of the Theory of Perfect Competition is a constant theme here. (See paragraph two of this posting.)

Newtonian mechanics started with the assumption that apples and rocks, bullets and feathers, are all essentially the same. This was and is obviously untrue. How did the last rock you ate taste? Try throwing a feather fifty yards through the air. But to tease out how objects hurtling through space influence one another's motions, it made sense to pretend that apples and rocks, bullets and feathers, differed only in mass.

Armed with this and other useful falsehoods, Newton spun a mathematical web of motions and wobblings which turned out to resemble to a remarkable degree that which was to be observed in the real world. Clearly, these falsehoods, despite their obvious falsehood, explained a lot. By dismissing obvious truths and concentrating only on other truths, Newton showed that the dismissed truths didn't matter and that only the truths he did bother with counted. To summarise the next two and half centuries of scientific and worldly reaction: wow!

But this did not mean that Newton thought that apples and rocks either did taste, or should taste, the same.

The Theory of Perfect competition is likewise a theory which starts with a string of falsehoods, but which also turns out to make much sense of how the world seems to work. Falsehoods like: lots of tiny firms rather than a few big ones; and: perfect market knowledge among all consumers. Falsehoods like that. Nevertheless, combine such falsehoods and you get a world which resembles the real one, and which seems therefore to do much to explain it.

At this point economic interventionists looking for excuses to hate free markets accuse us free marketeers of believing that firms really are infinite in number and identically tiny and of believing that consumers really do have perfect knowledge. "Perfect Competition" requires that these things be true, so we claim that they already are. No we don't and no it doesn't. But, say the interventionists, we interventionists must now intervene to unfalsify the assumptions upon which Perfect Competition is based.

It is as if, faced with the overwhelming desire to hate Newton, his contemporaries had said that Newton did believe that rocks and apples tasted the same, so Newton was a fool, and that in order to make Newtonian mechanics work properly, they had to play God and to crush all earthly and heavenly objects into a vast number of identical dots of tasteless and colourless mass, otherwise the universe would grind to a halt.

If you doubt that this is how anyone does think, read this, which was written by a Christian Aid policy wonk in 1999, and which was linked to by Alex Singleton last week.

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Competing over the weather
16 MAY 2005 - The kind of thing readers here probably expect is links to things like this article, about the difficulties facing the new director-general of the World Trade Organisation in his presumed efforts to get more global competition. Well, there you have it.

But I found this article, about weather forecasting, more tho