Professor Hannes H. Gissurarson, RNH Academic Director, gives a lecture on the theories of French economist Thomas Piketty at an international conference of European Students for Liberty in Bergen 18 October 2014. He will compare the theories of Piketty and American philosopher John Rawls, the main difference being that Rawls was concerned with the poor, but Piketty with the rich. He will criticize Piketty’s use of data which involves a systemic underestimate of the income of the bottom income group and also a systemic overestimate of the income of the top income group. However, admittedly it is possible that the gap between rich and poor in the West has widened in the last few decades. One reason for this, Professor Gissurarson submits, could be globalisation which has two discernible ffects. First, unskilled labour in the West meets competition from unskilled labour in China and India and other countries putting pressure on wages. Secondly, individuals in the West with special abilities, difficult or impossible to reproduce, for example film stars, entertainers, athletes, innovators and entrepreneurs, now can reach a much bigger market than before, thus vastly increasing their income. Professor Gissurarson will also pose the question whether anything is really wrong with an unequal income distribution, if it is distribution by choice.

Other lecturers at the conference include Dr. Yaron Brook from the Ayn Rand Institute in California and Professor Emeritus Rognvaldur Hannesson, from the Norwegian Business School in Bergen, NHH. Dr. Brook will discuss the moral message in Rand’s works, while Professor Hannesson will analyse the possible privatisation of marine resources. Professor Hannesson’s most recent book is Ecofundamentalism: A Critique of Extreme Environmentalism. The lecture of Professor Gissurarson forms a part of the joint project by RNH and AECR, the Alliance of European Conservatives and Reformists, on “Europe, Iceland and the Future of Capitalism”.

F. A. Hayek

Professor Hannes H. Gissurarson, University of Iceland and RNH Academic Director, gives a lecture at an international conference of the Economic Freedom Institute at Manhattanville College in Purchase, New York State, north of New York City, Friday 10 October 2014. The conference is devoted to The Road to Serfdom by F. A. Hayek, published 70 years ago. Seventeen academics and scholars give papers at the conference, including the distinguished monetary economist Jerry Jordan, former President of the Federal Reserve Bank of Cleveland, William Poole, former President of the Federal Reserve Bank of St. Louis, Professor Sanford Ikeda, State University of New York in Purchase, and Professor Edward Stringham, Fayetteville State University in North Carolina.

Professor Gissurarson discusses spontaneous evolution in Hayek’s sense. First, he analyses briefly three well-known examples where people can solve in market transactions what economists have sometimes wrongly considered to be public goods, only to be produced by government. The first example is from A.C. Pigou about two roads of different quality where the traffic would not be allocated efficiently between them. F.H. Knight pointed out that this problem could be solved by private property rights to the two roads. The second example is in many textbooks, including that of P.A. Samuelson. It is of lighthouses where seemingly it is difficult to confine their services to those paying for them. R.H. Coase pointed out the historical record which showed that these services had often been included in port tolls. Therefore, their services could bee privately produced and priced. The third example is the US radio spectrum, where radio frequencies are allocated by government agencies. T.W. Hazlett pointed out that in the 1920 private property rights to certain frequencies in certain areas were being developed, by court decisions in a homesteading process, but that this development had been stopped by federal law.

Then, Professor Gissurarson analyses three Icelandic examples. Professor Thrainn Eggertsson has written about one of them: Grazing rights, itala, which was formed when farmers used mountain pastures in the summertime for their sheep. The pastures were each commonly held by an association of farmers in the valley closest by, but the temptation for each farmer was to add more sheep to the total number than was efficient, because the loss was dispersed amongst all the farmers, but he alone reaped the profit. This temptation was removed by only allowing each farmer to graze a given number of sheep on the mountain pastures. The second example is well known to all Icelanders. Professors Ragnar Arnason and Gissurarson have both written on it. The system of Individual Transferable Quotas, ITQs, was developed to stop the over-utilisation of the Icelandic fishing grounds. The general idea is the same as in the case of over-grazing: Each fishing vessel owner gets a quota. Then the quota-holders discover in their trade of the quotas who are best qualified to harvest fish and who would be better off leaving the fisheries. The third example is of the Icelandic krona. It was equal to the Danish krone, and Iceland was indirectly a member of the Nordic currency union before 1914. But between 1922, when an exchange rate between the Danish krone and the Icelandic krona was first registered, and 1992, the value of the Icelandic krona went down to 1/1000 of the Danish krone (the krona having been replaced by a new krona, worth 100 old kronur, in 1983). Obviously, the krona did not adequately two of the three roles of money: to be a unit of account and the store of value. Therefore, Professor Gissurarson had already in the early 1980s suggested that the krona would be replaced by a harder currency, such as the US dollar. However, the market had already solved this problem by introducing the indexed krona, which was a hard currency, unlike the ordinary krona, which remained a soft currency and which could still fulfil its role of being a medium of exchange. Thus, Iceland essentially used two currencies. A cup of coffee was paid for by ordinary kronur, but long-term contracts were made in indexed kronur.

Professor Gissurarson argues that the Icelandic institutions or rules of grazing rights belonging to particular farms, fishing rights defined to particular fishing vessels and the indexed krona for long-term contracts are examples of spontaneous rather than constructed solutions. They were developed in a process of trial and error, even if such solutions had sometimes to be consolidated or protected by legislation. His lecture in New York forms a part of the joint project by RNH and AECR on “Europe, Iceland and the Future of Capitalism”.

Ridley in Iceland in 2012

Many exciting events are coming up at RNH in the autumn of 2014. At a seminar on “Taxes and Income Distribution” Friday 24 October, 4 pm, in the meeting room of finance company Gamma, Gardastraeti 37, Professor Corbett Grainger of the University of Wisconsin in Madison will explain why a resource rent tax in the fisheries may be both less efficient and less equitable than the development of private use rights; Professor Ragnar Arnason will analyse some deficiencies in the measurements of income distribution and tax burdens; and Professor Hannes H. Gissurarson will criticize the theories of French economist Thomas Piketty on an ever-widening gap between rich and poor. The seminar is held on the occasion of the publication, by AB Publishing, of a collection of papers in Icelandic, Tekjudreifing og skattar (Income Distribution and Taxes), by six Icelandic scholars, Professors Ragnar Arnason and Hannes H. Gissurarson, Associate Professor Birgir Th. Runolfsson, Assistant Professor Helgi Tomasson and doctoral candidates Axel Hall and Arnaldur S. Kristjansson. The book was sponsored by an institute with which RNH often cooperates, RSE. The seminar is co-sponsored by the Icelandic Taxpayers’ Association.

At a seminar on “The World is Getting Better” Thursday 30 October at 5 pm, in the meeting room of the finance company Gamma at Gardastraeti 37, best-selling author Dr. Matt Ridley, former science editor of the Economist, member of the House of Lords and a regular contributor on science to The Times, will discuss the main topics in his book The Rational Optimist which is being published by AB Publishing under the title Heimur batnandi fer (The World is Getting Better). A frequent visitor to Iceland, for salmon fishing, Ridley mentions Iceland thrice in his book. Professor Thrainn Eggertsson responds to Ridley’s talk, and Professor Ragnar Arnason explains why the Icelandic system of individual transferable quotas, ITQs, in the fisheries is a good example of a sustainable and profitable utilisation of a natural resource. The two seminars form part of the joint RNH-AECR project on “Europe, Iceland and the Future of Capitalism”. RNH will also be one of the sponsors of a European Students of Liberty conference in Iceland 15 November.

F. A. Hayek

Professor Hannes H. Gissurarson who is RNH academic director, will also give some lectures this autumn. One of them will be at the Economic Freedom Institute conference in Manhattanville in New York 10–12 October on F. A. Hayek’s Road to Serfdom. There he will describe how three Icelandic institutions, grazing rights in the Icelandic mountains, an indexed currency for long-term contracts (establishing in fact two currencies, one soft and one hard) and fishing rights, ITQs, in the fisheries, are all examples of spontaneous orders in Hayek’s sense, even if they have to be supported by law. Another lecture will be at a European Students for Liberty conference in Bergen 18 October where he criticizes the ideas of French economist Thomas Piketty on income distribution. The third lecture will be at a conference organised by the Social Sciences Research Institute at the University of Iceland 31 October on the attitude and opinions of British authorities, in particular Chancellor Alistair Darling, on Iceland. Professor Gissurarson discusses Darling’s account of Iceland in the financial crisis in his 2011 book, Back from the Brink. The fourth lecture will be at the Institute of Economic Affairs in London 27 November where he seeks explanations for the fact that Iceland was left out in the cold in the 2007–9 international financial crisis. His lectures form part of the joint RNH-AECR project on “Europe, Iceland and the Future of Capitalism”.

Twenty five years will have passed on 9 November 2014 from the fall of the Berlin Wall, a symbol of the victory over communism in the Cold War. On this occasion, RNH will open a website with online books on communism, starting with the Black Book of Communism, edited by Stéphane Courtois, originally published in French in 1997, and published in an Icelandic translation by Professor Hannes H. Gissurarson in 2009. This event forms a part of the joint RNH-AECR project on “Europe of the Victims”. Dr. Tara Smith of the University of Texas in Austin will give a lecture Monday 24 November at 5 pm at the University of Iceland, meeting room HT-105 in Haskolatorg, on the message of Russian-American author Ayn Rand, whose books have sold in more than thirty million copies all around the world and inspited many readers. AB Publishing, sponsored by RNH, has published three novels by Rand, The Fountainhead (Uppsprettan in Icelandic) 2012, Atlas Shrugged (Undirstadan in Icelandic) 2013 and We the Living (Kira Argunova in Icelandic) 2014. A staunch supporter of capitalism, Rand maintained that progress could only be brought about by creative individuals, entrepreneurs and innovators, not by those who live by exploiting others. Dr. Smith’s lecture forms a part of the joint RNH-AECR project on “Europe, Iceland and the Future of Capitalism”.

Next year, 2015, Professor Gary Libecap, one of the world’s leading experts on resource management, Professor Andrew Morriss, an expert on law and economics, Julian Morris of Reason Foundation and other scholars will give papers at an RNH conference on “Green Capitalism”.

MPS founding members Popper and Hayek

Three people from RNH will attend the general meeting of the Mont Pèlerin Society in Hong Kong 31 August–5 September 2014, Gisli Hauksson, Chairman of the Board, Jonas Sigurgeirsson, RNH Executive Director, and Professor Hannes H. Gissurarson, the RNH Academic Director and the only Icelander to be a member of the MPS. This annual meeting’s leading theme is “Emerging Asia and the Future of Liberty”. Speakers include UCLA Professor Deepak Lal, Japanese economist Yoshinori Shimizu, Stanford Professor John Taylor (after whom the Taylor rule on monetary policy is named), former Czech President Vaclav Klaus, New York University Professor William Easterly, author of many analyses of the futility of “development aid”, leading security expert Edward Luttwak, Harvard Professor Roderick MacFarquhar, French monetary economist Professor Pascal Salin, and many renowned Chinese scholars, both from mainland China and from Hong Kong. The intellectual legacy of two prominent MPS members who recently passed away, Nobel Laureates Gary Becker and Ronald Coase, will be discussed as well.

The Mont Pèlerin Society was founded in Switzerland in 1947 on the initiative of Professor Friedrich A. von Hayek, the 1974 Nobel Laureate in Economics, whose 1980 visit to Iceland had much impact, helping prepare the ground for the successful 1991–2004 liberalisation programme. Among the MPS founders were Milton Friedman and George J. Stigler from the US and Maurice Allais from France, who all were to receive the Nobel Prize in Economics, but also the distinguised Austrian-American economist Ludwig von Mises, Luigi Einaudi, President of Italy, Chicago Professor Frank H. Knight, and the Anglo-Austrian philosophers Karl Popper and Michael Polanyi. Other prominent members of the MPS in the past include German Chancellor Ludwig Erhard, US economist and Nobel Laureate James M. Buchanan, and Otto von Habsburg, the last Crown Prince of Austria-Hungary. The present President of the MPS is American economist Professor Allan Meltzer, the author of the definitive history of the US Federal Reserve System. Former Presidents include Hayek, Friedman, Stigler and Buchanan, Professor Antonio Martino, Italy’s former Foreign Minister and Defence Minister, and Dr. Ed Feulner, former Director of Heritage Foundation. The participation of the RNH people form a part of the joint project by RNH and AECR on “Europe, Iceland and the Future of Capitalism”.