To explain the price of English housing once again

Absolutely everything you need to know about the absurd cost of English housing is contained in these few paragraphs:

A farmer has rejected a £275million offer for his land from housing developers wanting to build a new town.

Robert Worsley said he would be ‘doing a massive disfavour’ to the community where he has lived all his life if he ‘took the money and ran’.

The 48-year-old father of two has run 550-acre farm for the last 15 years.

He was approached by agents for housebuilder Mayfield more than two years ago. Other landowners on adjoining sites in Twineham, near Haywards Heath, West Sussex, are also believed to have been offered large sums.

The multi-million pound potential offer is 100 times the farm’s current value, even though it covers only one-seventh of the proposed 10,000-home development.

It's Mr. Worsley's land, he can do as he wishes with it.

But there's the reason that English housing is so expensive. Land that may potentially be built upon is worth 100 times that same land that cannot potentially be built upon. That is, the chitty that is issued to allow building upon a piece of land is at least 99% of the cost of the land plus chitty. It is therefore the planning system that makes housing so expensive.

Thus, as we've pointed out ad nauseam, the answer is to issue more chittys so as to bring down the cost of them. There's no mystery here, no problem. If something is expensive because it is in artificially short supply then the answer is to increase the supply of it.

Perhaps we might suggest abolishing the Town and Country Planning Acts?

We're not going to believe this report, sorry, we're not

We have the latest salvo in the barrage about how bad foods, those ones that we enjoy, must be taxed and those good foods, the ones we don't so much, must be subsidised. That is, tax sugar and carbohydrates, subsidise fruit and veg. The argument today being that the bad foods have fallen relative in price to the good ones sand that this is very bad, not good.

The report’s authors found that fruit and vegetables had risen in price by up to 91 per cent in real terms between 1990 and 2012, a bigger increase than for other any other food group. “In high income countries over the last 30 years it seems that the cost of healthy items in the diet has risen more than that of less healthy options, thereby encouraging diets that lead to excess weight,” said Steve Wiggins, one of the authors of the report.

The report itself is here.

There's a few things being missed. Weight is a function of calories in, calories expended. We don't gain weight simply because we eat cheaper calories. So this cannot be an explanation for rising obesity levels. Further, all food has become cheaper relative to incomes, so if price really is determining what we eat then we might expect the diet to have become healthier. Whatever budget constraints we had on eating that "good" food have still been relaxed, whatever has happened to relative prices.

But perhaps more importantly than this we're not sure that we believe the price indices themselves. They appear to be looking at the prices that people actually pay for the goods, not at prices for a constant form or type or quantity. Thus it's "prices of fruit" or "prices of vegetables" as they appear in the average consumer basket. And there's a few changes in the composition of that consumer basket over those 30 years.

1) Around the year availability of alomst all fruits and vegetables. This is going to make the average price rather more than what it was when we relied upon the local and seasonal gluts. We also get very much more choice of very much more exotic fruits and vegetables and these are, not surprisingly, more expensive as well.

2) The rise of prepared foods. 30 years ago you could not wander into a supermarket and purchase a prepared salad, not a punnet of sliced fruit etc. Now one can and many do. This is obviously more expensive per unit of salad or fruit but we all seem happy enough to pay it.

3) The rise of organic and fair trade. These are both, by design, premium products at premium prices. And while they're not a vast portion of the food market they are significant enough to influence a price index composed in the manner this report seems to.

So, the price index seems to be composed not of what we actually want to know (are apples more expensive than they used to be?) but of what we actually buy (are we buying more expensive foods, of greater variety and exotica, all year rather than seasonally, in a more prepared state?). So we're afraid that we don't actually believe the stated statistic, whatever problems we've got with the theory that they're trying to push.

How I learned to stop worrying and love electoral politics

ASI bloggers spent a decent wodge of time blogging about how democracy is silly or irrelevant or bad. I'm probably the worst here. But I have to say that I had a great time following the election, which was instantly hugely exciting and shocking and interesting after the truly unbelievable 10pm exit poll.

My experience has led me to perhaps a more sanguine view on this central institution of modern developed society.

Democracies don't make that much difference to policy—possibly because technocrats rule anyway. Democracies potentially lead to less violent transfers of power. Democracies may make people happy through recognising people's fundamental equality. Democracies may make people feel like they're having a say. And democracy is a fantastic spectator sport.

1. Democracies and non-democracies that are otherwise similar have quite similar policies, except that non-democracies may have more progressive tax schedules. (pdf)

2. It feels likely that democracies minimise the costs of power transitions. I'm not absolutely sure about this one, because I can't find any good papers (please send them my way). If you can vote people out, you don't need to fight them out.

The problem is that democracies tend to be systematically different to non-democracies in loads of ways (e.g. Western Educated Industrialised and Rich as well as Democratic). Just looking at how power changed hands in 1700s France and how it does now might not be enough. Ditto comparing France now with, say, Algeria.

And I can at least imagine transition mechanisms that would make monarchies even more flexible than democracies, if changing all the king's advisors counts as a transition as well as changing the man himself. But let's chalk this one down anyway.

3. When you drill down, lots of people value democracy for more than its supposed benefits for picking policy. People think that fundamental equality of humans/citizens is very important, and this is an important way of recognising it. If lots of people care about it then it probably makes them all a bit happier and more satisfied with their lives which is good. Obviously I'd need to see evidence to be sure, but again it seems an under-researched topic.

4. This is slightly different to the above. Voters are very unlikely to make a difference; it's about 10m to one in swing states in the USA; and the closest ever parliamentary election was decided by two votes, but then redone anyway for a gap of hundreds. No single vote ever makes a difference to the direct outcome.

But it's quite reasonable to view a vote as being 'a say', even if it's not necessarily heard in policy. And if this siphons off popular dissent and makes people identify more with their government and society it might make people more satisfied with their lives, which is good.

5. This is really how I changed during this election: it was so exciting. I didn't really go into the election caring about who won, except that I hoped the Lib Dems held up and UKIP didn't get too many seats—I didn't vote or even spoil like last time.

But as it turned out I got caught up in it all and had a great time cheering and booing. Think how many people are made happier by sports—and politics is like a sport which really matters in measurable ways!

I never really got het up about democracy, but I've decided I'm a whole lot more comfortable with the whole thing.

Geography and economic policy

The Economist has an interesting look at the problems of countries without a coastline. Given the greater expense this loads onto international trade this makes those countries poorer. From which we can derive two interesting points:

With a few exceptions the world’s 45 landlocked countries are poor. Of the 15 lowest-ranking countries in the Human Development Index, eight have no coastline. All of these are in Africa, which is a poor region. But even compared with similar sea-front countries those without coastlines have lagged behind. Their GDP per person is 40% lower than that of their maritime neighbours.

The first and most obvious of these being that this is proof that international trade enriches a place not, as the autarkists would have it, impoverishes. Pleases that find it more difficult to trade are poorer than thoise who find it easier: pretty good evidence that all that import substitution malarkey is indeed that, malarkey.

The second is a policy point. The total trade barrier in and out of any economy is not just the tariff barrier. Nor is it the regulatory plus the tariff one. It's the costs of transport plus the tariff plus the regulatory. Thus, if you find yourself with high transport costs as a result of he above geography you should therefore be trying to be even more free trade in your regulatory and tariff attitudes. Because, as above, more trade makes you richer.

And interesting example of this is the US economy after the Civil War. Tariffs were raised considerably. This is often used as an example of a country developing successfully behind such trade barriers. But this coincided with the development of cheap ocean going steam ship transport. The total trade barriers into the American economy actually declined in this period. Late 19th century US development is an example of more trade leading to more development. We can check this too: trade did indeed rise considerably, despite those raised tariffs. And traded items converged in price across the Atlantic in this period: price convergence being a signal of freer trade.

The import substitution argument insists that some level of autarky makes places richer. The real world says that people with higher trade costs become poorer. We prefer to take our evidence from the real world, amazingly enough.

There's a difference between the intent of regulation and the effects in the real world

We have another of these lovely examples of how the intent of a regulation can be very different indeed from the effect of said regulation out there in the real world. We'll assume that most people are pretty cool with there being regulations against murder and punishments for breaching them. We're also pretty sure that such regulations and punishments reduce the number of murders that occur. So, sure, some regulations can indeed be beneficial, achieve their stated goal. We can also look around the world and see those gurning idiots in South America who think that if you peg the price of toilet paper nice and low then the poor will be able to afford toilet paper. Of course, what happens is that no one can afford toilet paper as no one is willing to make it for this new and lower price. Regulations can have the opposite effect to that intended.

And then there's, well, then there's this:

Fair or not, this latest evidence of the risks of informal surrogacy arrangements, in the context of Britain’s strict regulatory code, can only encourage more parents to bypass local options and head straight for a poorer or developing country. In India, for example, surrogates are plentiful, screened and by all accounts more dependable than British volunteers.

Leave aside, for a moment, any judgement on either the morality or desirability of such surrogacy. And consider the statement there. That strict regulation of who may do what and when drives the very activity itself out of the regulatory net. Does this regulation therefore achieve its aim? We would say probably not. The take away from this specific example being that, if one wanted to keep the activity inside the regulatory net then one would probably argue for a lighter touch with the regulation.

This observation is of a great deal mpore use than just talking about reproductive technology of course. It's from the one side, the argument used in favour of legal abortion: without the legality it would still take place on those fabled backstreets and this would be worse. And it, from the other side, informs our attitude towards recreational drugs. As is obvious it's going to happen anyway. So, loosen the regulations on whether people can or not so as to bring the activity into the regulations on purity and safety. Which is, as should be obvious, exactly the same as that abortion argument. Both are arguing that regulation should be pitched at the level to minimise harm, that only being possible when regulation is sufficiently light for the activity to remain regulated at all.

Thus it is essential that all regulation be "light touch" regulation. Within a wide and highly variable definition of "light" to be sure, dependent upon the specific activity. But it must always be light enough not to drive the activity underground and thus out of the reach of any regulation at all.

It was the Yanks wot won it

This isn't the result we usually think of. It's more likely that we'll think that the terrible loss of life by the Soviets, or perhaps plucky little Britain, fighting on alone, is really what won the battle against the Nazis. but the wisdom of the crowds has it right again:

As the world celebrates the 70th anniversary of Allied victory in Europe, millions in the UK will honour the role played by British forces in the defeating Nazi Germany.

According to a new poll, however, most other countries look to the United States as the country that did the most to vanquish Adolf Hitler.

A YouGov survey asked respondents from the US, Britain, and several European countries who they thought was most essential to defeating Germany in the Second World War and the US was the top choice in all but the UK and Norway.

Modern war isn't won by battles. It's won by winning the war. And that's more a matter of logistics than anything else. And it's at that point that America becomes so important. The vast productive capacity of the American economy meant that Germany was going to be defeated, whatever else happened, in the end. Once, that is, that the United States had come into the war on the side against Germany.

We can talk a lot about tactics, battles, who suffered most (that has an easy answer, those inbetween Germany and Russia, those in the Bloodlands) but the eventual outcome was never really in doubt. Not once the American economy entered on the one side.

An interesting supposition

And one that may well have a measure of truth to it. That supposition being that there's only so much tax that you can pull out of an economy:

While raising taxes was “easier” for a future chancellor to do than shrink expenditure, Dame DeAnne added: “My personal view is that this country is hitting rates of marginal taxation that are pretty close to the ceiling of what you can expect to actually get to work for you by getting increasing revenues by increasing rates.” Dame DeAnne suggested that spending cuts were the only solution,

She used the example of Labour’s pledge to restore the 50p top rate of tax to illustrate her point. The Institute for Fiscal Studies believes the policy is unlikely to raise more than £100m, after the Coalition’s decision to cut it to 45p cost the government around the same amount, according to official studies.

“It’s difficult to see where you can get substansial additional revenue from the tax side unless it’s through broadening the VAT base, which both parties have said they are not going to do,” said Dame DeAnne. “Anyway, that’s a politically difficult thing to do.”

Mr Plenderleith agreed. “There are a range of views as to what the optimal tipping point is and it seems to me that we’re quite close to that,” he said.

We do not say that this is absolutely true. But that it is generally true seems to us to be an intriguing thought. That there's a rough amount of the economy that you can tax out of it. That rough amount changing over very long periods of time perhaps, and over different countries, but each place having its own natural rate. Outside true emergencies like all out war no one's really managed to get much more than 35% of the British economy in tax. The American Federal system never seems to manage more than 19 to 20% for anything other than a couple of years. Yet the tax burdens in other countries can and have been for decades rather higher.

This is also true whatever the tax system actually is. Whether it's all largely consumption based, or income, or they try to nickel and dime us to death with imposts on this or that, some cultures will accept higher tax burdens than others. For we've tried different variations of the tax system over time and those amounts that we can collect don't seem to budge all that much.

all of which will be something of a disappointment to Polly Toynbee of course. For as she's fond of pointing out we Brits seem to want Scandinavian style services with American style tax rates. The analysis here leading us to the conclusion that it's the taxes that are the immovable object: meaning that it's the services that have to be cut to fit that, not just the tax rates raised to provide that chicken in every pot and a pony.

Why we vote the way we vote

In my last post I tried to understand why people vote, suggesting that even if a sense of civic duty or a desire to express oneself can explain why we turn out to vote, these can’t really tell us much about why we vote the way we vote. In this post I'll try to explain why I'm convinced that, for voters, ideas matter. There are two basic views among political scientists about this: people vote to maximise their own wellbeing (“pocketbook” voters) or people vote to maximise the wellbeing of their society (“sociotropic” voters). The literature here is enormous so this post will try to sketch out the argument broadly – it is not intended to be anywhere near comprehensive.

There is a clear correlation between declines in GDP per capita and declines in support for the political party in power ('economic voting'). But this could be because people who are worse off are changing their votes to improve their own welfare, or because people in general are trying to improve their society in general.

In ‘Sociotropic voting: The American case’, Donald Kinder and D. Roderick Kiewiet look at how voters behave when their personal circumstances differ from those of society in general – if you are unemployed, but total unemployment is low, are you more likely to want a change of government?

Looking at Congressional elections during the 1970s, they find strong evidence that people are more concerned with society and the economy as a whole than for their own circumstances.

‘A person’s private economic experience had very little impact on his choice of candidate in the congressional elections whereas his sociotropic judgements were of the utmost importance … American voters resemble the sociotropic ideal, responding to changes in general economic conditions.’

Kiewiet’s conclusion in a later book is that people blame factors other than the government for their own circumstances, but blame the government for the overall state of the economy. Is this a uniquely American phenomenon, though?

Leif Lewin’s review of the evidence in his excellent Self-interest and public interest in Western politics suggests that it is not – Western European voters, including British voters, also seem to be much more inclined to vote sociotropically than with regard to their own circumstances.

We know that voters are mostly very ignorant of the facts of politics, which may make it very hard for them to form accurate judgements about the best policies to achieve the end-goals they have in mind. But it also means that the media that they do pay attention to has an enormous influence over their perceptions, and that people’s political awareness may affect how ‘benevolent’ they really are.

In light of this, Gomez and Wilson (2001) adapt the pocketbook thesis to argue that more sophisticated, politically aware voters are more likely to be affected by pocketbook factors than others.

They are the ones who can think in terms of specific policies, make connections between particular policies and their own incomes, and do not blame incumbents for everything that goes wrong with the economy.

Other, less sophisticated voters simply assume that the President is responsible for what goes wrong with the economy. That might explain why electoral ‘giveaways’ (pensioner bonds, opposition to new home builds) seem to be concentrated on quite small groups of well-heeled voters – nobody else would notice.

The last word on voter behaviour must go to Philip Converse, whose 1956 survey data showed that most voters make their decisions based on extremely broad judgements of the ‘sign of the times’ (22%), or based on which group – posh people? workers? – a party or politician seems to speak for (45%), or even evaluations that had no shred of policy significance whatever, like which candidate was the funniest (17.5%).

Only around 15% of voters used ideology or ideology-like rules-of-thumb to decide who to vote for, and those were the most rigid in their decisions about how to vote.

To sum up, people seem to mostly vote for the candidates that they think will be best for society as a whole, though they may make very poorly considered judgements of that. If there is a ‘pocketbook’ effect, it is probably limited to the most well-informed voters.

All this suggests that the public choice view of democracy as just a way to divide the spoils of government between interest groups may well be wrong. Yes, voters are amazingly ignorant of basic facts, let alone economic theory, but we do have a chance of persuading them and changing the world for the better. To those of us who would like to believe in the power of ideas, that’s something to celebrate.

The perils of fake Fairtrade products

It's just so difficult to be a properly concerned middle class social justice warrior these days, isn't it?

Well-meaning shoppers may be wasting money on groceries bearing fake Fairtrade or organic logos, after police in Europe identified counterfeit food labels as one of the fastest growing frauds.

Fairtrade or organic bananas, vegetables, tea and other items are bought by millions of people concerned about the provenance of the food on their plates.

But the certification logos on packaging can be “easily replicated and affixed” by experienced counterfeiters, the Europol law enforcement agency said.

Its experts warn that organised crime groups have “joined forces” to run counterfeiting operations inside the EU.

They are forging quality labels on “everyday products” that can then be sold at a premium, as opposed to the traditional fake handbags and medicines.

As it happens we don't think this is a particular problem. Fairtrade makes virtually no difference at all to those poor, third world, producers. It has a marginal value as a form of indoor relief for the dimmer scions of the upper middle class. But the real value gained from it is the near holy righteousness that a certain type of shopper feels as they proudly display their status by showing off the correct, socially approved, labels of "organic", "Fairtrade" and so on. Given that this, the main effect of the system, still applies to fake labels it seems to be a most efficient way of achieving that main effect.

Greenpeace should be allowed to say it even if they're wrong

We find ourselves a little bit conflicted here. That Greenpeace has been spouting lies making incorrect statements does not surprise. But we are rather absolutist on this free speech thing. Absent incitement to violence and libel we're pretty sure that anyone should be allowed to say whatever they wish. And we're most certainly not happy with some organ of the State deciding what it is that people may or may not say. Thus the conflict:

A Greenpeace advert opposing fracking has been banned for claiming experts agreed that the process would not cut energy bills.

The national press ad said: "Fracking threatens our climate, our countryside and our water. Yet experts agree - it won't cut our energy bills."

The Labour peer Lord Lipsey, who said he understood there was a range of views on the subject, complained that the ad was misleading for claiming experts were in agreement.

Greenpeace said the claim was made in the context of a public debate on Government policy, and cited quotes from David Cameron, who has repeatedly backed fracking and claimed that it could bring down energy bills.

The organisation provided quotes from 22 people, groups or organisations supporting the view that fracking would not reduce energy prices.

That Greenpeace are wrong is something we've proven here and elsewhere before. However, there is that free speech issue. And as we say, we don't think that such speech should be banned.

Quite apart from anything else if people are banned from spouting obvious lies then how can we spot them when they're being a bit more disingenuous and spouting non-obvious lies?