Welcome to the year of economic fallacies

  • Robert Stewart is the author of two books on the Bermuda economy

    Robert Stewart is the author of two books on the Bermuda economy

Saturday’s Royal Gazette contained a feast of articles each articulating an economic fallacy about present-day Bermuda.

They were entitled:

• “Workers to be allowed to suspend pension payments”

• “Burt: tourists to pay for their Covid-19 tests”

• “Database to help shoppers budget backed by MPs”

The first fallacy proposes a plan to allow access — or depletion — to pension fund assets in order to deal with the financial problems facing many Bermudians.

This is crazy.

It means that Bermudians will deplete their retirement financial assets now, but it also means that in some distant future, they will suffer financial hardship because they have spent their personal pension fund.

Politicians should pay attention to the Aesop’s fable about the ant and the grasshopper. Those who remember their childhood will recall that the ant prepared for a hard winter by working hard during the summer, while the grasshopper sunbathed. When winter came, the ant continued to eat and the grasshopper starved.

This proposal does not help workers; it simply makes life much more difficult in their later years. It kicks the financial can down the road and figuratively converts Bermuda ants into grasshoppers. No one but a fool spends his retirement assets, and then hopes to live happily ever after. But that is what Curtis Dickinson in his wisdom is proposing.

The second fallacy is that tourists will happily pay for their Covid-19 tests. A moment’s reflection should at least suggest that there is a possibility of tourists resisting such a tax — even if the amount is less than the $3,000 charged by Cambodia. I think that our charge would be less than $3,000, but the Government has yet to establish a reputation for keeping costs down, as many of us recall from such financial fiascos as the Berkeley Institute and the cost of the bus timetable.

The third fallacy is the price-comparison service. Coming from a government that cannot compile a bus timetable, I cannot wait to see how this works out. People themselves can compare prices; they do not need snollygosters in Parliament telling them how to compare prices. A five-year-old can do that.

The price comparison proposal — in effect an attempt to impose price controls on retail stores — is a resurrection of the old medieval concept of a just price. This has been shown time and time again to be a fallacy.

May I refer David Burt and Walter Roban to the book entitled Forty Centuries of Wage and Price Controls: How Not to Fight Inflation by Robert Lindsay Schuettinger, which illustrates in very clear terms that the implementation of price controls over 4,000 years in many countries simply did not work — indeed, it made things worse.

This government has yet to establish a reputation for competence in financial matters and the three proposals mentioned in the Saturday edition of The Royal Gazette clearly indicate that it simply fails to understand elementary finance, and continues to follow economically counterproductive policies that make poor Bermudians even poorer.

Is it any wonder that many Bermudians are emigrating, and we are losing one of our greatest assets — namely people with knowledge, skills, ambitions, energy and resourcefulness — what in short is called human capital?

This is biggest fallacy of all.

Robert Stewart is the author of two books on the Bermuda economy

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Published Jun 24, 2020 at 8:00 am (Updated Jun 24, 2020 at 8:32 am)

Welcome to the year of economic fallacies

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