To examine the views of Richard Murphy once again

Apologies for scaring everyone with that little photograph. But it is necessary, as we occasionally do, to examine the views of the country's leading tax expert once again. Yes, it's Richard Murphy time:

It’s hard to see how someone can set out the case that markets have totally failed and yet believe they can still deliver, but he does.

And he is wrong. His description of what is wrong is fair. His suggestion that this can continue is absurd. This is a system on the brink of falling over. If he can’t see that I strongly suggest you do not follow his advice. I do suggest that you think about what will happen when he has to realise how mistaken he is, because the scenario of falling labour returns and capital sitting idle doing nothing cannot persist. Change has to happen.

And right now only the state can break the log jam.

He's making the mistake that Adam Smith warned us against when he talked of consumption being the only and sole purpose of production. The contention that Murphy is making there is that neither labour nor capital (and it is emphasised in the piece he links to) have any pricing power at present. Therefore profits aren't particularly going anywhere and nor are wages. This isn't actually a failure of markets.The absence of pricing power among producers (and both labour and capital are indeed, in this case, to be considered as the producers) is actually one of those things that we assume when we construct our models of how free markets should work.

And so who benefits from this? Well, the only other people around are us chickens out in that marketplace, the consumers. And if labour and capital, the producers, aren't benefitting all that much from the current structure then it must be us as those consumers that are getting all the benefit of the onward march of technology. That is, the consumer surplus is increasing while what we must pay is not. And please do note that it must be us the consumers benefitting. There just ain't nobody else out there.

As Smith pointed out, this is not a failure of markets. This is actually what we want, what we desire. That consumption being more important than the production. And yes, that lack of pricing power among the producers, that very point we make in our models about free markets, is exactly what delivers to us this desired goal.

Perhaps Murphy would find tax an easier subject than economics?

Let's have a Hayekian welfare state

The latest issue of Econ Journal Watch discusses the correlation between support for economic regulation and welfare state redistribution among economists. Why, Daniel Klein asks in the issue’s opening chapter, is an economist who supports a lot of economic regulation so likely to support a lot of income redistribution as well?

How are issues of progressive taxation, redistribution, and universal government provision so much like, say, the issues of public utility regulation, antitrust, consumer protection, workplace safety and labor standards, environmental protection, financial regulation, insurance regulation, land-use controls, housing regulation, agricultural regulation, healthcare regulation, transportation regulation, energy regulation, and so on?

A good question. He suggests that economists are motivated at a basic level by their feelings about ‘governmentalization’ – a general preference for or against using the government to solve problems that face society.

But like Andreas Bergh, another contributor, I am not convinced that at least one other configuration is so unlikely. Bergh argues that a ‘Hayekian welfare state’ is possible and may be more attractive than Klein suggests. I agree.

Probably the strongest general argument against regulation is given by Hayek, who argues that in a complex world our actions often have unexpected consequences. A ‘spontaneous order’ is a non-random system that has come about from individually-chosen actions, not from the design of a central planner. A language that does not have a central designing body might be an example, as might a free market economy.

In Adam Ferguson’s words, these are the result of human action but not of human design. Hayek’s argument is that because events in these orders have been shaped by the individuals’ choices within them, what may appear to an outside observer to be an inefficiency or failing may have a hidden logic to it.

Central planners or rule-makers often lack the information they would need to make good regulations, and in situations where people’s tastes or innovations may change over time, they may not ever be able to make regulations that achieve their own goals.

This argument has been added to by more recent work that has emphasised the value of feedback loops in learning (which markets have, but regulators usually don't), and the dangers of imposing the same error across an entire system. If we think that the future is basically unknowable in a complex world, and so most plans are wrong, but that we can learn from our mistakes and successes, then we should want as many different experiments as possible, with as many different mistakes to learn from.

In practical terms, that means that we should have a predisposition against regulation, even regulation that appears to solve problems, if it holds people back from experiments. There are also serious examples of regulations leading to bad things that are even worse because everyone has been forced to make the same mistake, which strengthens this predisposition even more. The more complex a system is is, the more we should value pluralism.

All of this has to do with having limited knowledge in a complex world, not incentives, though of course there may be good incentives-based arguments to be made on a case-by-case basis against certain regulations.

But this doesn’t tell us very much about the distribution of wealth in a society. To use Bergh’s terminology, redistribution may be something that can be done with relatively low amounts of knowledge. That doesn’t mean that it can’t fail – clearly it can, very easily, if the level of redistribution is set too high (or too low) – or that the system itself be badly designed.

The particular distribution of wealth in an economy may be an efficient reflection of who is most productive, and interventions that try to correct for that are likely to fail for the same reasons that other interventions designed at improving market efficiency will fail.

But we may have non-economic concerns about the distribution of wealth as well. An economy in which everyone is paid according to their productivity may be very brutal for people who are not very productive and cannot change that. We may wish to redistribute income for their welfare.

We might also want to redistribute money to encourage the sort of experimentation that drives innovation, above. Or, as Ben has argued, to make the market focus more on satisfying the wants of unproductive (ie, poor) people than it currently does.

A good argument against this would be that we don’t need the state to redistribute – that, left alone, private charity will be enough. There is some evidence for this position but not enough, yet. Maybe some day there will be and I will change my mind.

Until then, I am with Bergh. A ‘Hayekian welfare state’ would do almost no regulation of the economy, but redistribute quite a bit of money for welfare reasons. This looks not just possible, but very desirable.

The Green spectre

I was reading the other day that The Green Party Is The Second Most Popular Party For Young People. This popularity surge is probably not that surprising really - we see increased environmental awareness in younger people these days, and it’s often the case that a vote for a minor party means a vote that expresses disenchantment towards the mainstream parties. However, many prospective Green voters would surely be thinking about being a little more circumspect if they saw Andrew Neil's Sunday Politics interview with Green Party leader Natalie Bennett, which stands out for me as one of the most alarming exposures of ill-conceived economic policy I've seen in a long time. It's rare to see a leader having her party's policies torn to shreds without even the smallest ability to defend them or balance them up - instead simply getting in a jam each time and responding with “I would urge your viewers to go our website and see how the figures are worked out.”

Alas, that's the reality, though - their policies are indefensible - economic moonshine of the worst kind I've seen. Not only are they inimical to successful human progression and increased prosperity, they are antithetical to even the basic truths you'd learn about in first year economics.

Their proposed wealth tax is simply a pipe dream. Bennett claims it will generate between £32 billion and £45 billion, when the reality is that wealth taxes in other European countries generated only a fraction of that. Add to that the proposals for import tariffs, business subsidies, increased minimum wage, price controls, and the kind of Piketty-esque redistributive taxation that would be almost certain to hamper innovation, and drive much of our best talent out of the UK, and there is a good case to made that with The Green Party in their current form, we have, in terms of the economy, perhaps the most dangerous fringe party of them all - a party whose policies would severely compromise the global benefits of innovation, trade, competition and the free market of supply and demand far more than all the other parties would.

A vote for the Green Party actually gives every indication of being a vote for negative growth, as they look to free humankind from what they perceive as the disaster of its Promethean economic advances. While it’s true that in some cases people willingly vote for one of the smaller parties because they are disenchanted with mainstream politics, it’s also true that as the landscape begins to shift, and dissection of the minor parties' policies intensifies as more look to get their feet in Westminster’s door, surely very few people could actually bear to envisage what the country would be like if The Green Party's policies were ever made manifest in any kind of sphere of political influence. At the very least Natalie Bennett's car crash defence of the Green policies on Sunday Politics should elicit the well known spectre: 'Be careful what you wish for' young people. Or to use a famous Shakespeare line:

Take but degree away, untune that string, And, hark, what discord follows!

The most frustrating Vox article ever

The internet has made everybody audible. And, as a result, anybody can become a victim of a pitchfork-wielding mob, if you happen to say something online that the mob wants silenced. Nowhere has this reality been clearer than in the backlash against nascent feminism on Twitter.

This is the opening premise of a new Vox article on the Men’s Rights Movement (MRM), which is the most quotable thing I’ve ever read. (That is not necessarily a compliment.)

The author, Emmett Rensin, ventures into Chicago suburbia to talk to ‘Max’ - a young mid-20's man who views himself as a Men’s Rights Activist. We are taken into his world and explore his views on feminism, religion, and the world as he perceives it. I found the whole experience very painful, for two reasons:

First, I am no defender of the “Men’s Rights Activists” (MRA), who often take serious issues - such as paternal rights and domestic violence against men - and use them as a jumping-off point to threaten women online or to justify sites like this as good for the movement.

Max is no villain, but rather an immature guy who is defined more by his struggle to discover his beliefs than by any particular belief he holds at the time: Max is an MRA, but kinda not (he prefers to think of himself as a ‘humanist’). Max agrees with the MRM philosophy, but not with the radicals. Max tweets mean things at feminists, but does not condone threats or violence. Max is wishy-washy and says silly things a lot. Max isn't likeable. He's a one-note caricature. And it's a long article...

The other problem with the article comes down to the author's narration; his narrow view of gender issues makes the article painfully ironic.  Rensin gives the allusion of trying to get to the heart of what motivates men like Max to engage with the MRM, but quite obviously wants to make sure we hate Max. After all, Max lives in a ethnically homogenous area:

When I met him, Max lived in the River North neighbourhood of Chicago. River North is — at 70 percent white in a city where the white population is 32 percent and declining — one of the few places one can live in the Chicago where it is still possible to avoid even a vague awareness of the city's racial and cultural dynamics.

And he is privileged:

Max is remarkably unassuming in appearance, handsome enough and normally tall; equally imaginable in board shorts and a snapback as he is in the sort of graduation suit one wears to a first post-collegiate interview downtown.

And he is disconnected from reality:

For all his derision toward the "professional victimhood" of feminists, there's something a little less than sarcastic in Max's own sense of oppression. Hard-pressed as the social justice left is to admit any advantage, the West these last decades has seen the rhetorical value of victimized stance. The irresistible cudgel of "I am oppressed and this is my experience and you cannot speak to it because you do not know" is valid enough, of course, especially in those cases where ordinary enculturation does not provide natural empathy toward some suspect class. But it is a seductive cudgel, too, especially alluring when it can be claimed without any of the lived experience that makes marginalization a lonely-making sort of suffering. American Christians are "persecuted" now; men are the ones being "squelched" by feminism; white Americans are the victims of "reverse racism." The "victim card" is a child of the ‘70s, and 40 years out who wouldn't use it, no matter how disconnected from reality?

It’s this last paragraph that really gets me - "professional victimhood". A spot-on observation from Rensin, that stops short one step too soon.

It is indeed ridiculous to push the idea that men are oppressed in western society. While grievances over the role of the father, forced-masculinity and male-targeted abuse are all important and legitimate discussion points, they are part of a much wider discussion about how gender roles are dictated in society and don't add up to conclude that men's rights are the most vulnerable and abused rights in 2015.

But are women oppressed? Just as the author questions whether men are really being "squelched" by feminists or whether American Christians are really being "persecuted" by atheists or non-believers, isn't it also time to ask whether women should still be able to claim professional victimhood in the western world?

I'd say they can, when it comes to violence - particularly domestic abuse and rape. But that isn't what 'professional feminists' are talking about. They seem much more concerned with the gender pay gap (which doesn't actually exist for young women working in the UK) and iconic t-shirts (which are...iconic) than they are with issues that actually harm and oppress women. Too often, feminists are relying on victimhood to promote their policies, making little-to-no effort to address the real, forced victimhood created through violence.

It's hard to embrace modern feminism when it's leaders are defining it as pro-victimisation. Many men and women want nothing to do with that.

As our least-favourite caricature notes:

My mom says she's a feminist. And I guess in the way my mom means it, I still am. But she doesn't know how it is now. For her, feminism means ‘everybody is equal', but if you said that now, these social justice warriors on Tumblr would call you a sexist and garbage and tell you to die. But I didn't realize that at first. I thought feminist meant ‘women should be able to vote and have jobs', which I'm obviously cool with.

I'm cool with that too, Max. I'm cool with that too.

This is really quite gobsmacking from Friends of the Earth

Friends of the Earth is running a series of little debates over what we should all be doing to make the world a better place. Obviously this is not a bad idea: how to make the world a better place is an entirely suitable subject for discussion even if we'd not expect all that many useful suggestions from that quarter. Imagine our surprise then, the quite gobsmacking surprise, that they're actually recommending voluntary cooperation and free markets absent government regulation:

Isn’t Wikipedia a paradise for practical jokers?

If we run our global commons like that, we’ll be saving forests that don’t exist and hailing the creation of a super-sucking CO2 machine called Bee Jay.

Not true. It isn’t perfect – don’t use it to diagnose any health problems – but it’s perhaps more accurate than you think. A study favourably compared the reliability of Wikipedia to that of the Encyclopædia Britannica.

In any case, Wikipedia is a permeable mega-site. Anyone can edit it. So it’s pretty darn impressive that millions of people confidently use it every month.

And don’t forget, compared to the waves of anonymous Wikipedians, the group of people negotiating our global commons are visible and relatively minute. Indeed, their UN talks should be a doddle to manage in comparison.

Well, yes, your humble author was one of those who had a published conversation with the former Editor in Chief of Britannica at the time that research came out. And I was able to point out exactly why Wikipedia did work. In a different manner to a centrally edited encyclopedia, yes, but the end result was as good or better. Less checking and verification at the outset but that voluntary interaction led to a result, over time, as good or better.

Wi-Fi, air traffic control radars, mobile phone networks… They all have their own frequency highways. But these highways need to be managed to stop multiple-wave pile-ups.

Did I mention that they run across national borders? Tricky. Yet a network of technical bods across Europe have been managing these frequencies without political interference – even throughout the Cold War.

Like Wikipedia, they huddled around shared interests – not wanting to live in a world resembling a detuned radio. Their interactions fostered a sense of community and a common cause. As did flexibility eg countries could use frequencies formally allocated to other countries, as long as they didn’t interfere with existing radio services. Cooperation gave birth to standards and regulatory powers.

Quite, the use of those common resources were managed, as the mentioned Elinor Ostrom pointed out, by people voluntarily cooperating for their own enlightened self interest.

We know that markets work, that world around us shows that markets work but as with Dr. Johnson, the surprise is not to hear such things said so well but to see them from this source.

So, we can expect FoE to be signing up to the neoliberal globalisation plan then can we? You know, the only one of the various plans on offer that is based upon this acknowledgment of the inclination to voluntary cooperation among human beings, the only one that allows that inclination to flourish?

Oh well done, well done here!

One of the little problemettes that we have with government is this left hand, right hand, thing. The entire beast is so complex, intervenes in so many different ways, that that left hand can be doing something entirely at odds with what the right hand is tyrying to achieve. And so it is here:

Landlords will be banned from renting out England and Wales’ draughtiest homes from 2018 in a bid to cut energy bills and carbon emissions. The new regulations are expected to help around a million tenants who are paying as much as £1,000 a year more than the average annual bill of £1,265 because of poorly insulated homes.

Campaigners hailed the move as potentially the most significant piece of legislation in a generation aimed at improving building stock in England and Wales, which is some of the oldest and leakiest in Europe.

We're told, in increasingly screeching tones, that the major problem facing the country is the lack of homes available for people to live in. In response to which the government decides to take 1 million homes off the market. Or, in an alternative formulation, insist that large investments be made in extant housing to the detriment of investment in the more housing needed.

Oh, well done there, well done indeed!

CMRE's Friedman Lecture on school choice

The Centre for Market Reform of Education’s Inaugural Friedman lecture kicked off with success last week amid a plethora of events marking international school choice week. Sir Julian Le Grand delivered the lecture ‘School choice matures: lessons for policy makers’ as educationalists of all spheres, from teachers to campaigners, posed questions and examined how best to reform education systems and advocate educational freedom.

Increasing the diversification of producers and external pressure on public services, the Social Policy and Economics Professor described, would improve the quality of education. School choice is the crucial cause of both of these. Chaining people to their local schools by means of catchment-allocation alongside the state’s one-size-fits-all approach is failing. People would prefer the pressure of markets - with parents and children choosing the institutions and preferred teaching methods - as opposed to perpetual pressure from politicians imposing targets. 

Public perceptions of profit-making and the belief that school choice is a 'middle class thing’ were distinguished as impediments to the truth that proponents of the freedom to choose have on their side: creating an environment conducive to competition, and thus advancement in schooling provision, requires that options within the reach of the wealthy and middle classes are available to the poorest sectors of society also. Precisely why, Professor Julian Le Grand said, the poor benefit most from school choice.

You can listen to an audio recording of last week’s lecture and find CMRE's detailed publications on school choice, incentivising quality and educational inequality here.

The real problem of three-parent families

In a world first, MPs recently voted to permit IVF babies created using biological material from three different people, in order to prevent serious genetic diseases caused by faulty mitochondria passed on by the mother. This looks set to benefit around 2,500 UK families. Much has been made of the creation of ‘three parent babies’. That term is misleading; whilst the biological material of three people is involved, less than 0.02% of the child’s DNA will come from the anonymous female mitochondrial donor. However, there is another form of ‘three parent’ baby-making, the rules for which are long overdue reform: surrogacy.

The use of surrogacy is on the rise, no doubt in part fuelled by same-sex partnerships. However, the process is fraught with difficulties, from the assignment of parental rights to the non-enforceability of surrogacy agreements, and, crucially, the fact that ‘commercial’ surrogacy is illegal in the UK.

First of all, the parental rights assigned at a surrogate child’s birth fail to reflect who will actually care for the child. Under UK law, the carrier of the child is considered the legal mother, no matter if they are genetically related or not. If the carrier is married or in a civil partnership, her partner becomes the child’s second parent. A genetically-related commissioning father will be considered the second parent if the surrogate doesn’t have a partner, but a commissioning mother will never automatically receive parenting rights to the child.

To obtain proper legal parenthood, commissioning parents must apply for a Parental Order no more than six months after the birth of their child. Only couples may apply for an order and they can take months to process, leaving a child’s main carers in legal limbo.

Another interconnected and significant issue is that surrogacy agreements are only considered informal arrangements, and cannot be legally enforced. This means that no matter how careful or extensive arrangements are made, there is no guarantee that they will be honoured. In the UK where the surrogate is considered the legal mother, they are able to refuse to hand over the child, even if it is genetically unrelated to them.

Surrogacy agreements with legal weight would alleviate both these problems. An obvious solution would be the recognition of some kind of ‘surrogacy pre-nup’, outlining what compensation or fees will be given to the surrogate, as well as establishing the ‘correct’ parental rights from the moment of birth.

However, another significant barrier to the use of surrogacy is the fact that commercial surrogacy is strictly prohibited in the UK (as it is in a large number of other countries). Currently surrogacy can only take place on ‘purely altruistic’ grounds, with compensation limited to ‘reasonable expense’ only. Prospective parents are banned from advertising their interest in surrogacy, as are potential surrogates. If no suitable surrogates can be found in the UK, commissioning parents often look to certain US states (such as California) or the 'baby factories' of India, Thailand and Ukraine to find a willing surrogate.

The foundations of the legal status of surrogacy stem from The Warnock Report into IVF in 1984, which stated “it is inconsistent with human dignity that a woman should use her uterus for financial profit”. But what exactly is so demeaning about offering gestational services for financial compensation or gain?

It’s often argued that commercial surrogacy substitutes the norms of parental love with market norms. It encourages us to think of parental rights as more like property rights than a fiduciary relationship, and the ‘selling' of children, especially for profit, is wrong. However, what’s taking place with commercial surrogacy is the purchase of gestational services and the delivery of a child, not the child itself. The property rights involved are those of the surrogate's, who has rights of control and exclusion over her body and (most liberals will argue) may use her uterus as she sees fit.

Another related idea is that there are some things - like votes- which are simply too fundamental and valuable to sell, and that the bringing about of a child is one of these things. This type of argument is made by Michael Sandel, who claims that putting a price on some of the ‘good things’ in life corrupts them, and that their commodification results in their degradation.

However, paying for gestation does not diminish the innumerable other ways in which it has value. Placing a market value on something is not to say that it has no value over and above its price - ‘priceless’ paintings are still bought and sold for sums of money. The gift of a child to a couple, and the gratitude felt towards a surrogate can indeed be priceless, even if money is exchanged.

The real question is what informed and consenting adults may do with their bodies and its functions. Arguments defending prostitution form an obvious parallel here. But even prostitution aside, there are a number of ways we profit from using our bodies and its products. We allow hair, blood, and tissue to be sold, so why not the uterus? People use their hands and brains for profit, and ‘sell’ their bodies to medical science and to sporting contracts — what then, is so immoral about gestating someone’s child for a fee? Sperm donation is not particularly morally troubling to us, even though this too separates the genetic and biological elements of baby-making, allows the donor to give up parental rights, and to profit from their act.

Admittedly, many may feel uneasy about the entire surrogacy process; it uses our bodies in ways which are somewhat unnatural, and uproots our usual intuitions about motherhood, pregnancy and prenatal bonding. Whilst we may accept it in extreme, altruistic cases, perhaps 'normalizing' the process with a commercial market leaves an unpleasant taste in our collective mouths. However, a feeling of unease shouldn’t be justification alone for prohibition.

Our comfort zones and thoughts on what are acceptable change over time. Single parenting loses its stigma, and the acceptability of same sex couples grows. When first introduced the contraceptive pill was considered an aberration of nature. Today it is considered one of the biggest feminist breakthroughs of the 20^th century. Perhaps with time the position of ‘the gestator’ will come to be viewed as a honourable and respectable profession, bringing joy to families and worthy of commercial recognition. Science lets us wage war on biological conventions and constraints, and it is time for us to tackle the social and legal barriers, too.

The marvellous consistency of John Harris

John Harris has one of his, as usual, excellently done pieces detailing the economic wasteland that is a town where Tesco has decided not to arrive. Bit of vox pop, bit of background information, the underlying tale being that of course the capitalist bastards are ripping the heart out of good honest working class communities by not arriving. It's very well done:

Throughout the 1990s and all the way up to the crash of 2008 and beyond, this was how whole swaths of Britain were rebuilt, and Tesco led the charge, to the point that it sometimes seemed to be a wing of government, and some people began to fear the dystopia crystallised in the title of Andrew Simms’s best-selling book Tescopoly. Now, though, Tesco is in retreat, and its sudden withdrawal from scores of places has left behind resentment, anger and what feels like a strange state of shock.

It's just that this was the same John Harris who only 5 years ago was not only complaining about Tesco coming to town but actively campaigning against it doing so:

This is the kind of nightmare many Frome locals fear: the dullest, most oppressive kind of arrival, thoroughly out of sync with a creative, imaginative local atmosphere. Put another way, it'll be another small step closer to the kind of future long since mapped out in middle America, in which banal convenience will conquer all – and this being Britain, forgetfulness will come at 24 cans for a tenner.

The underlying tale being that of course the capitalist bastards are ripping the heart out of good honest working class communities by arriving.

Our assumption is not that if you're a Guardian columnist then you've got to find something to complain about. Nor even that to be a lefty you must have some whinge, whatever it is. It's that in order to be properly bien pensant you must be whining about something. What is whined about does not matter, the logical consistency of successive whines is unimportant, to be a Very Serious Person discussing the state of the world has moved on from EM Forster and ended in "Only whine".

Logical Fallacies: 7. Affirming the consequent

https://www.youtube.com/watch?v=m9hjWTe33Wk  

Madsen Pirie's latest moral fallacy: affirming the consequent.

You can pre-order the new edition of Dr. Madsen Pirie's How to Win Every Argument here