Economic Nonsense: 13. Development and growth harm the environment and cause pollution

This is misleading.  The early stages of economic development can certainly adversely affect the environment and cause pollution.  When a nation is lifting itself out of abject poverty and subsistence-level life for its citizens, it values the wealth being generated more than it minds the environmental degradation that accompanies it. The early stages of Britain's Industrial Revolution saw factories going up, chimneys belching smoke, and land degraded by mining.  For people at the time these factors were less important than the improved standard of living it brought, a standard that lifted most of them out of precarious subsistence and the ever-present threat of starvation.

When Britain grew rich enough, they were able to afford a cleaner environment.  Money was available to spend on adequate sanitation and sewage treatment, on cleaning up land damaged by development, and by controlling emissions with legislation such as the Clear Air Act.  Other developing economies went through similar stages.  Today it is the rich countries that can afford to produce more cleanly.

Newly developing countries pollute more because clean production is more expensive.  Wood burning and coal burning pollute heavily; gas burning and electricity production can be done more cleanly.  Today China, which depends heavily on coal as an energy source, faces major air pollution problems in its cities and contamination of its rivers.  But development has lifted most Chinese out of malnourishment, and now they are at the stage where they have enough wealth to start redressing their environmental problems.

Development and growth need not cause pollution and environmental damage once countries become wealthy enough to use cleaner technology.  Wealth and technological progress can solve this problem; living more simply cannot.

Now that we've extended marriage to all let's not make it compulsory

Recent years have seen significant changes in marriage: it's now essentially available to all potential pair couplings of whatever gender definition one wants to use. That doesn't therefore mean that it should become compulsory though. And yet that is roughly what is being proposed:

In 2007, the Law Commission recommended reforming the laws that apply to cohabitants if they separate but no legislation followed. There are nearly 6 million unmarried people living together, many under the illusion that they have the same rights as married couples if they separate.

Resolution is calling for a legal framework of rights and responsibilities for unmarried, cohabiting couples to provide some legal protection and secure fairer outcomes at the time of a couple’s separation or on the death of one partner.

To which our answer is no. For we are believers in choice.

Believers in choice over who you might mingle genitalia with, as we always have been. And also choice over who you might share accommodation with. And even choice as to the economic arrangements that you might want to make surrounding who you mingle or share with. That choice is there in the law as it stands. One is entirely at liberty to live with someone without making formal economic arrangements. One is also able to take up that contract of marriage, something well defined in law. This current suggestion is that that first choice should no longer be available. And as a reduction in choice we're therefore against it.

There is the point of any children that might come from a relationship but their rights and the responsibilities of the parents are already well defined in law.

Essentially the proposal is to introduce common law marriage as a legal position. And English law (except in very odd circumstances involving being in foreign) simply has never recognised it. For the plain and simple reason that if yout want the protections of the contract of marriage then go and get married. Now that all can do so it really isn't the time to make it compulsory.

Economic Nonsense: 12. Minimum wage rates raise living standards for the low paid

When minimum wage rates per hour are set by law, it can raise the wages of those already in jobs and who manage to stay in those jobs.  It has a negative effect on those who lose their jobs because firms no longer find them worth employing at the new rates.  It has negative effects, too, on those trying to enter the labour market who do not yet have enough skills to be worth the minimum wage to potential employers. Firms employ people because they are worth more to the firm than the wages they cost it.  For low-skilled people their value to the firm might be quite low.  Very often it is by starting on low wages and acquiring on-the-job skills that people move up the employment ladder.  Someone who has worked has learned the importance of good time-keeping and following instructions.  They have learned how the firm likes to do things, and are more valuable than an unknown potential employee.  If the minimum wage is set at a level above that of their value to the firm, they find it difficult to secure those starter jobs.

In many countries those with low skills tend to be young people and sometimes those from ethnic minorities, especially if they have not had an adequate education.  When minimum wage rates are increased, there often tends to be increased unemployment among these categories.

When minimum wages were introduced in the UK, the level was initially set sufficiently low that it had a minimal impact on employment.  Subsequent increases are believed to have increased its impact, leading some economists to suggest that a better way of raising the take-home pay of low earners is to stop taking tax off them.  Raising thresholds for income tax and National Insurance increases their wage without it costing employers money and pricing their services out of the market.

No, we really shouldn't build the Swansea tidal lagoon

It's possible that we really should think about tidal power. There's a lot of it about and around our islands, so why not ponder whether we could capture some of it? The real point to ponder of course being whether it makes us all collectively richer. And there we find that there's a slight problem:

Plans to build the world’s first ‘tidal lagoon’ in Swansea Bay have suffered a setback after influential consumer charity Citizens Advice said the project was “appalling value for money” and should not receive subsidies.

Ministers are preparing to begin formal bilateral negotiations with developers over the proposed green energy scheme – a £1bn, six-mile sea wall with turbines to harness the power of the tide, which has already been included in the National Infrastructure Plan.

Tidal Lagoon Swansea Bay is thought to be seeking a guaranteed subsidised price of about £168 for every megawatt-hour (MWh) of electricity it generates over a 35-year period – almost four times the current market price of power.

And there is the problem. All of us having to pay, through our electricity bills, four times the current price for electricity does not make us collectively richer. It makes us, significantly, collectively poorer. Further, sorry about this, no you cannot add in all sorts of greenery arguments and no CO2 emissions and future high gas prices and all that malarkey. This has been comprehensively studied in great detail:

What they've done in the report is look at all of the different variations of the proposal. A great big dam across the whole estuary, the various partial ones, lagoons with turbines and so on. And they've looked at all of the various different costs and benefits of them. Environmental costs, emissions, the cost of gas fired plants which would be the alternative, everything up to and including the kitchen sinks in which the workmen will wash their hands. And what we find is that the more we spend on it, the bigger we make the project, the more it makes us poorer.

For what we're looking for is a positive net present value. That is, all the costs, properly discounted into the future, are a lower number than all of the benefits properly discounted into the future. When we get more benefits than there are costs, we become richer. For the Cardiff Weston Barrage, similar to what Hain is currently proposing, we have a net present value of -£27.1 billion. Yes, that is minus £27.1 billion. The costs of this plan are £27.1 billion, which even in government circles is something that can be described as real money, higher than the benefits that we all get from this scheme. Building it will make us all, collectively, £27.1 billion poorer.

That these plans (and all variations studied have exactly the same result) have a negative net present value is simply the flip side of their needing a high fixed price for the electricity they produce. One is simply the capitalisation of the other, the point that they are just not economically sane projects.

If this project does get off the ground, if some fool does issue a contract for differences at such prices, then we can take that as a marker that the inmates really have taken over the asylum. This is simply a terrible deal that should be immediately rejected.

Economic Nonsense: 11. Inflation is a price worth paying to boost employment

It used to be thought there was a trade-off between inflation and employment.  The economist William Phillips published a 1958 paper in which he found an inverse relationship between money wage changes and unemployment over nearly a century.  The relationship was called the Phillips Curve, and was used by legislators to stimulate the economy by inflation to boost employment rates. Unfortunately the Phillips Curve went vertical in the 1970s as countries were beset by high inflation and high unemployment occurring simultaneously.  People were building expectation of inflation into their calculations and their economic decisions.  Inflation rewards debtors at the expense of creditors and makes people less ready to lend.  Investment in productive activity diminishes.

No less seriously, the assumption of future inflation makes forward planning difficult.  People do not know what money will be worth by the time their goods reach the market.  What inflation does do is cause misallocation of resources.  People see the new money created by government and make false assumptions about what they should invest in.  When they find that the demand was unreal, goods go unsold and there is an economic downturn with increased unemployment.  This brings about the 'stagflation,' in which high inflation and high unemployment happen together.

Inflation can reduce unemployment in the very short term, but only at the expense of more unemployment following afterwards.  This is why some governments have boosted inflation in an election year to take advantage of the apparent stimulus, then face the recessionary consequences after the election is safely out of the way.  The strategy is now called boom and bust because an inflationary boom is followed by a real-world bust.

Logical Fallacies: 12. Abusive analogy

https://www.youtube.com/watch?v=hHUVzpbgkB4  

Madsen's latest video on logical fallacies examines the 'abusive analogy'.

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

Democracy is the concept that the people should get what they want

Good and hard, as Mencken put it. But even so some of the things that people want surprise. As in this Owen Jones piece:

According to the opinion polls, most Britons want public ownership of rail and energy, higher taxes on the rich and a statutory living wage.

A statutory living wage?

The poll of 1004 employed people shows that 71% of Labour voters, 66% of Lib Dems and even 44% of Tories (60% overall) say we should increase the Minimum Wage to a Living Wage – and that the government should make the Living Wage the legal minimum. There is majority support for such a move across all regions of the country and all social class groups. Interestingly, the group who most agree that a Living Wage is needed (even if it costs jobs) are the D/E social class group – working class voters who are more likely to be paid the minimum wage, and know how hard it is to live on the poverty line.

The argument against the Living Wage becoming the legal floor is that it would cost jobs – which is exactly what was said about the Minimum Wage, and it didn’t happen then. However even if that is the case, the public still think poverty wages are something that should be a thing of the past.

The problem with this is that the pe4ople don't know the truth about that living wage. That it is a pre-tax number. They also don't know that if we did not charge income tax and national insurance to those low wages (as we have repeatedly argued that we should not) then the current minimum wage would provide a higher post-tax income than the proposed living wage would with the current tax system. They don't know this because the current agitators for the living wage don't tell them.

And the reaction really will be different if the question is properly couched. For example, would you support the ending of tax poverty? would be an interesting formulation.

For that's actually what we've got, not low wage poverty but tax poverty.

Polly Toynbee explains why the NHS should be privatised

Not, admittedly, what we would expect to hear from Polly but the case she makes for the privatisation of the NHS is logically perfect:

Ration life! Limit the value of a good year of human life to £13,000 to spend on any one drug, says a report from Prof Karl Claxton of York University. Spend more, and other patients die for lack of funds.

That’s the crunch point in NHS funding, according to health economists at York University, inventors of the original notion of measuring health spending by Qaly – a quality adjusted life year. If all health spending was put through this rigorous analysis of ensuring every pound bought the best value, there would be a remarkable shift in NHS priorities. Mental health would score highest, not lowest, in spending, as each pound can buy the most effective diminution of intense suffering. Suicides are rising, most among young men in deprived areas – deaths that could be preventable at reasonably low cost. Instead, a minor operation may take priority, as headline waiting time targets matter more politically.

During a period of the steepest cuts per capita the NHS has ever known, the government has weakened attempts to ration rationally.

Politics, being politics, means that the NHS is being run irrationally. The solution is therefore to remove the NHS from being run by politics. That part of national life which is not run by politics is known as "the private sector".

Thus the NHS should be privatised. QED.

And do remember, it's not us telling you this, that's Polly Toynbee saying it.

We do sometimes wonder about the boffins

One of the endearing things about the very British idea of a boffin is that they are assumed to be entirely indifferent to the real world. What matters is the theoretical world going on inside their heads, not the more mundane one in which we all pass our lives. This does, of course, lead to some hilarity when that theory is applied to said real world. Perhaps our favourite example of this was when the new economics foundation decided to take their principles of what constituted the good life and rank countries so as to decide upon where was the very bestest place to live. Their answer was Vanuatu (subsequent versions of the report changed the ranking method so as to produce a less embarrassing result). The best society on the planet was one of Stone Age tribesmen, wearing penis sheaths, who worship the Duke of Edinburgh as a Living God. This rather startling result does of course tell us a great deal about the theories the nef uses to evaluate the world.

We've a close contender for this in The Lancet Global Health:

Belgians are known for their chocolate and waffles, while Hungarians are famous for their rich goulash.

But now, a global study has revealed they are among the nations with the worst diets in the world.

Meanwhile, Chad and Sierra Leone, in Africa, have the best diets, consuming the most fruit, vegetables, nuts and wholegrains.

It will be interesting to see what "best diet" here means.

As part of the study, a team of international researchers analysed data on the consumption of 17 key food items and nutrients related to obesity and major diseases like heart disease, stroke, type 2 diabetes, and diet-related cancers.

They looked at the changes in diets between 1990 and 2010 in countries around the world.

They looked at three different diet patterns and gave each a score.

The first was based on 10 healthy food items: fruit, vegetables, beans and legumes, nuts and seeds, whole grains, milk, total polyunsaturated fatty acids, fish, omega-3s, and dietary fibre.

The second was an unfavourable diet based on seven unhealthy items: unprocessed meats, processed meats, sugar-sweetened drinks, saturated fat, trans fat, dietary cholesterol, and salt.

The third was an overall diet pattern based on all 17 food groups.

Hmm. So, by this ranking system the top five countries, the countries with the "best" diets are Chad, Sierra Leone, Mali, Gambia and Uganda. And the five with the "worst" diets are Armenia, Hungary, Belgium, Czech Republic and Kazakhstan.

Average lifespans in our best diet countries are, respectively, 51, 46, 51, 59, 56. For the worst diets, 74, 75, 81, 78, 68.

Meaning that whatever criteria our boffins are using for best and worst diet it seems to be an entirely theoretical one, existing in their heads not this reality we inhabit. For at the very least there's not even a correlation between their idea of better diet and longer lifespan. Which, we would all rather assume, would be a useful definition of "better" in relation to diet, no?

We are reminded of the New Yorker cartoon with one caveman saying to another: "If all our food is free range and organic then why are we all dead by 30?"

Economic Nonsense: 10. Government spends more efficiently than private individuals

This is not only untrue; it is laughably untrue.  Sometimes supporters of big government spending claim that government is more efficient because it doesn't need to make profits.  Sometimes they say it doesn't need to spend on advertising.  Sometimes they say it can borrow more cheaply than private businesses because it has taxpayer backing.  The facts show that even with profits, advertising and higher borrowing costs, the private sector is vastly more efficient.  The UK's nationalized industries were ailing giants that gobbled subsidies when they were state-owned.  When they were privatized they became profitable private companies that paid taxes instead of collecting subsidies. Private investors are more careful because it is their own money at risk.  The public sector corresponds to the fourth quarter of Milton Friedman's quadrant:  they spend other people's money on somebody else.  The private sector is competitive; it has to attract funds competitively.  It has to anticipate future demand to avoid investing unproductively.  Private projects seek ways to curb costs, to employ people efficiently, and to keep as close as they can to a timetable.

Public projects are notorious for cost overruns, for over-manning, and for being completed years behind schedule.  Private projects are undertaken in response to market signals; they are subject to commercial pressures.  The aim is to produce items that will meet future demand and generate profits.  Public projects, by contrast, are subject to political pressures.  They are often undertaken with a view to electoral popularity.  The projects chosen, their scope and their location are often undertaken to secure the backing of various interest groups and localities, in the hope that this will translate into electoral support.  None of this makes for efficient spending by governments.