An interesting and important question for Nick Stern

We're willing to go along with the concept here but can we please have an actual number?

With oil prices currently at a low level, now would be the ideal time to introduce levies that remove the implicit subsidy for pollution from petrol and diesel. The revenue from these levies could more than compensate the poorer members of the community for the price increases, give a boost to research and innovation, and contribute to the cleaner and more attractive investments that we need.

We know, we're rather keener on Pigou Taxes than many others are. But, following the IMF report on subsidies to the energy sector (please note, it wasn't an IMF paper, it was a paper by people at the IMF. It's not purely about fossil fuels, it's about the energy system. And it does depend on the idea that the tax system should be hugely regressive in order to reach its totals about how much tax should be raised by consumption. For example, it argues that the lower rate of VAT for domestic fuel is a subsidy. And you can think of it that way if you like. But two points: that subsidy also applies to renewables and can you imagine the furore from the usual suspects if we argued that to save the planet we must charge 20% on domestic fuel?) we have the above from Lord Stern. And the obvious question is, well, how much?

For there's a very important point about Pigou Taxes. The entire logical case for them, the justification, is that there is one just and righteous rate at which that tax should be levied. Add up the costs of all of the externalities and that is that tax rate. You cannot, not if you are being intellectually consistent, march around shouting "more". You must, in each circumstance, calculate what the rate is.

So, some 80% of the cost of petrol these days is tax. Is that enough? For example, Stern's $80 per tonne translates into a righteous carbon tax of 11 p on a litre of petrol. Ken Clarke introduced the fuel duty escalator to "meet our Rio committments". Which we take to be a synonym for a carbon tax. That escalator has added 23p or so to a litre of petrol. So, purely on the carbon emissions basis we are already paying too much in the UK.

This newer calculation tells us that there's more. Air pollution and so on. OK, that's fine, so, what's the number? What's the righteous Pigou Tax for that? They also say that a significant portion of the costs of petrol is congestion, accident damage etc. That's not something that can be attributed to the fuel: if we were all driving electric cars those things would still be there. That's a cost attributable to the transport system, not the fuel. And by far the largest part of the costs they attribute to this sector is the idea that consumer purchases should be taxed in order to raise revenue. And that if the tax is less than the amount they declare is correct, then that's a subsidy. But no one can say that UK petrol isn't paying tax. So that's out too.

So, in our calculation of what the correct petrol tax is in the UK we've got those two things. Carbon emissions, which are already being overpaid for, then pollution costs. So, what's the number, what should be the tax? And as above, "more" isn't a serious answer.

We have a very strong suspicion here. The reason we're not told what the number is is because that correct, just and righteous, number is actually lower than we're all being charged currently. Which is why Stern, the IMF and everyone else doesn't actually calculate it. Of course, we're willing to change our minds if they would calculate it and also let us see their workings....

Madsen Pirie writes for the Times on EU subsidy of rapeseed

Madsen has a piece in today's Times (paywall). He links the yellow fields of rapeseed that are making hay fever sufferers sneeze and wheeze to EU subsidies. After the Canadians bred a low acid version of rapeseed in the 1970s, the EU originally subsidized the seeds and the planting of it, not the actual crop. Then it went on to subsidize it for making bio-diesel, because it wanted a renewable energy source. So our green fields have been overtaken by a lurid yellow that many people dislike, and hay fever sufferers dash to the chemist's in large numbers.

By careful breeding, Canadian scientists produced a low acid version. Rapeseed was transformed, and spread rapidly across Britain, changing the look of the spring landscape with its lurid yellow flowers. Its UK production soared from about 1,000 tonnes in 1970 to more than two million tonnes in just a few years.

It was not the crop itself that made it a farmers’ favourite but the EU subsidy paid to those who planted it. The EU paid cash not for the crop that resulted but to fund the seeds and planting. It was a bonanza for landowners.

Read the full article here (paywall).

Against the idea of a 100% inheritance tax

There are arguments in favour of a 100% inheritance tax. For example, we could look to John Rawls and the argument from behind the veil of ignorance. If we didn't know where we would arrive in that lucky sperm club lottery wouldn't we prefer a society in which starting points were equal? So, tax inheritances at 100% and then distribute that wealth as a starting grant perhaps. However, the idea does seem to fail on two points. The first is that while it's true that we can't take it with us, therefore this could be seen as a "fair" tax, that people will fight, struggle and even lie to be able to provide an inheritance to their children does rather militate against the idea that people do see it as a fair tax. Peoples' actions do seem at odds with that particular result of that particular blend of moral reasoning.

But much more importantly we've evidence that such a system is not efficient. For we've had societies that did effectively have 100% inheritance taxes: and those societies failed precisely because they did.

Both Mamluk Egypt and the Ottoman Empire worked on the basis that whatever was accumulated during the lifetime of the elite (with the Mamluks, generals, with the Ottomans, Pashas) in the way of property, businesses, land and so on, was theirs for life and only for life. When they popped off those estates, however grand or vast they were, were distributed to the next generation of generals and pashas. With the Mamluks the children of the generals were, as they had not been recruited as military slaves from the steppes, specifically barred from even attempting to join that next generation of the elite.

This led to a certain short termism in how such properties were managed: having reached the top there would be, at most, a couple of decades to enjoy the wealth. Nothing could be passed down to the next generation. Thus, don't invest in anything, simply extract. Societies in which we do have 100% inheritance taxes therefore seem to become extractive ones, not investing ones. With all of the obvious connotations for the living standards of the subsequent generations. To say nothing of the current living standards of the peasantry being extracted from.

Whatever the philosophy here we have tried it as a species and it really just doesn't seem to work.

The immigrant's pledge

I wonder if would-be immigrants to this country might find a readier acceptance if they were to undertake a voluntary pledge similar to this one.  I think most would readily do so.

"I am grateful that you have allowed me into your country to seek a better life.

I promise in return that I will respect your culture and your customs and I will learn your language.  I know that your ancestors fought for centuries to establish freedom of speech and I will support that freedom.  I promise that I will respect the right of others to seek to improve their lives, without regard to their sex or sexuality. 

I will do my utmost to be a good citizen.  I will do my best not to be a drain on your resources, but to make a positive contribution to your economy and to your essential public services through the work that I do and the taxes that I pay.

I will respect your laws and I will respect my fellow citizens and do what I can to prevent harm coming to anyone.

I will try to live my life in such a way that I will be a credit to my new country, so that those who allowed me to come here and contribute to its future will be glad that they did so."

An odd theory but it's ours and we like it

As a result of a conversation going on elsewhere an odd little theory but as it is ours we rather like it. So, why is it that foreign state owned companies are able to run things rather well in Britain (trains, water, electricity, whatever) while when the same companies were British state owned they were appalling? It's almost as if only the British state is appalling at running things. To which we would say yes: the British state is appalling at running commercial enterprises in Britain. As if the French state in France, the German in Germany and so on. There's a tad of hyperbole there but here's the reason why.

Politicians running something (the definition of course of the state running anything) are going to run it with an eye to politics. The art of getting elected is, of course, to build a large enough coalition to get elected. This does mean pandering to various constituencies: the workforce of that state run business, the unions, the capitalists (for a different flavoured coalition) and so on. That concern over getting elected rather outpaces the single minded focus upon efficiency (and if you're cynical about capitalism, that efficiency can be in extracting profit,) that the private sector at least strives to through competition.

It's not so much that know nothing politicians inevitably screw up whatever they do. It's that the incentives for a politician running something are different given that he's got both the organisation itself to think about and all of those electoral pressures.

But that same organisation, when freed from those political concerns, might be reasonably efficient at doing whatever. So, for example, French politicians don't give a rat's ar....well, no, this is a family blog, ...don't care one whit about the political heft of British unions. In a manner that British politicians very much do. The same is true on the other side of the political ledger. Which way the media plutocrats instruct the populace to vote doesn't matter a darn for a politician in a different media market, in a different language. And no one at all has won or lost a French election on the performance of the 7.15 from Brighton to Waterloo.

The end result of this, we admit slightly odd, argument is that the British state would be just fine running the French railways, as the French state owned companies seem not bad at running portions of the British ones. Simply because being outside the political jurisdiction that elects the politicians at the top the politicians don't have those conflicted incentives and can thus allow the companies simply to run as companies, not as political arms of the state.

Or as we might also put it: by being outside the political jurisdiction that owns them allows state companies to simply be competitive companies.

The paradox of opportunity cost

It does get a little tiresome to be told, yet again, that too much choice is bad for us. Because of course we've been told this before: it's the cry of every bureaucracy everywhere, don't worry about what you're being given just accept what we're willing to offer you. It's also deeply rooted in basic economics, in the concept of opportunity cost:

Once, when I was suffering a fit of depression, I walked into a supermarket to buy a packet of washing powder. Confronted by a shelf full of different possibilities, I stood there for 15 minutes staring at them, then walked out without buying any washing powder at all.

I still feel echoes of that sensation of helplessness. If I just want to buy one item but discover that if I buy three of the items I will save myself half the item price, I find myself assailed by choice paralysis.

OK, depression can be serious but other than that, seriously? Modern society's gone wrong because we have a choice of washing powders?

The solution apparently is:

So how should one react to complexity? Schwartz suggests we should limit choice, not extend it. If you are shopping for food, go to supermarkets that are priced simply with a limited range, such as Aldi and Lidl. Recognise and accept complexity – which means accepting that you can never be sure that you’ve made the right choice.

Above all, don’t fall for the old trope of only wanting “the best”. Schwartz calls such people “maximisers” – people who are never happy, because they have expectations that can never be met, since in a world of complexity and unlimited choice there is always a better option. Be a “satisficer” instead – people who are happy to say “that’s good enough”, or “it’ll do”.

Well, quite. Maximisation of utility is an interesting concept to be pursued through economic models but out here in the real world we all in fact satisfice. Even if you just want to put it down to the tautologous maximisation of utility by not having to pay too much attention to details of choice.

However, to opportunity cost. The true cost of anything is what we must give up in order to have that thing. So, the real cost of this mortgage is the not having a mortgage, the not having that other type of mortgage. The true cost of jam with toast is not having Marmite with toast and so on and on. So, as the choices available to us rise then the opportunity cost of any one of them rises. And thus, yes, it really is true, more choice makes us unhappier.

To which, of course, the usual answer from the usual quarter is that we should have less choice and thus we'll be happier. But that's not quite how it works. For consider this.

There's long been a difference between male and female happiness rates. Women, in general, have always reported higher satisfaction rates than men. In recent decades that gap has been closing. No, men aren't becoming happier. Women are becoming less so, closing that gap. And what has been the great societal change over those decades that this has been happening? Quite: the life choices of women have expanded massively over that time, those of men not so much.

Do we think that such an increase in female unhappiness (or, rather a decrease in reported levels of happiness) is a reason to turn back the feminism clock? No, we most certainly don't, do we? And therefore nor is the unhappiness caused by having to choose one washing powder a reason to restrict the choice of washing powders.

There's very few who would publicly argue that a modern relationship should be based on "good enough" or "that'll do" despite the fact that near all of us are descended from generations of such relationships. Given that then why should we restrict what we may put on our toast?

Ring fencing banks

Apparently “City leaders” are now “in secret talks with Treasury on weakening the ‘ring-fence’ scheme after fears global lenders will abandon Britain” (Sunday Times, 17^th May).  This has been precipitated by the threatened departure from these shores of HSBC.  The only surprising thing about this news is that it has taken so long. My blog on the topic in December 2012 concluded “It is truly astonishing that this [Vickers] Commission should choose to focus its entire attention on the area that matters least [ring-fencing the banks’ retail activities].  The consequence of adopting their suggestions, as Vickers himself seems to be pointing out, can only be that we will hobble our own financial sector at great cost to the economy and the British taxpayer.”

The Treasury has to this day claimed that the public were demanding ring-fencing but that is nonsense.  Hardly anyone understands what it involves.  Invite the general public to sign a ring-fencing petition and see how many sign up.  The only reason they might is because the big banks do not like it.  Those few denizens of the City and Westminster who do understand what it involves fall into two camps: fantasists and realists.

The fantasists believe that investment bankers brought down their retail siblings and that, in turn, created the 2008 crash.  Actually it was caused by the retail sector giving mortgages, largely under US government instruction, to poor people who could not pay their debts.  Much the same happened in the UK: remember those building societies which turned themselves into retail banks?  They went to the wall first.

The realists know that however the regulators write the rules, those working for the same global corporation will find ways of cooperating.  That is what global corporations do.  Chinese walls are not even paper thin.

One, rather more practical, option was completely to separate retail from wholesale as the US used to do. That was abandoned by the Vickers Commission for good reasons.

The new government has better things to do with its time and attention than fiddle around with this, starting with resolving a deal with the EU.  There is zero chance that the rest of the EU is going to ring-fence their banks.  The Treasury should announce that, to be consistent with other EU banks, the whole topic will be postponed until after the EU referendum.

There is no such thing as free speech

In my view there is no coherent, cohesive thing we can point to and call 'free speech'. The traditional libertarian approach—speech is free unless violently interfered with (whether by the state or others)—is inadequate. You don't feel free to speak if you are going to be shouted down or subject to torrents of abuse, even if none of this is physical. You don't even feel free to speak if you will be hated or even just less well liked. You wouldn't feel free to say something if your friends were going to stop inviting you out or if your firm would stop employing you.

On the one hand, this just means that freedom of speech conflicts with your employer's freedom to hire who they like, or your friends' freedom of association, or people's basic freedom to like who they want.

But it also conflicts with freedom of speech itself. Stopping me from saying my true views about what you say may make you more free to speak but it is itself an interference in my freedom of speech.

I think that no society has or could have complete freedom of speech, you can only choose to protect certain kinds of speech. For example, patterns of speech we (i.e. our laws and courts) decide count as threats, incitement, harassment, abuse, hate speech, and so on, are not permitted in the UK.

And we do permit lots of other actions by the public at large that limit people's perceived freedom of speech: for example we allow people to be rude or mean on Twitter, we allow friends to tell their friends they respect them less when they've said things they don't like.

Our society might have made the right choices: in practice this means stuff like racist speech is forbidden, homophobic and sexist speech is becoming forbidden, as well as all the obviously unpleasant harassment and abuse mentioned above.

By contrast older versions of our society allowed racist speech but effectively banned blasphemy, whether through the law or polite society. They also banned public allusions to homosexuality, graphic sex and whatnot. On our modern values, these older prohibitions seem silly whereas current prohibitions stop genuinely dangerous speech.

People take a 'thick' view of freedom of speech when their position is weak. They tend to think that violence isn't the only thing that can restrict speech—losing a job or friends can too. But when they are strong they often resort to the 'thin' account, like xkcd 1357. I don't think this self-serving tendency is deliberate, but it's easy to come to when there is no single hard-to-challenge conception at the heart of the free speech idea.

It's fine to say that the words 'free speech' just mean some or other conception, e.g. the libertarian conception. If so, I don't think the concept 'free speech' is useful as a way of thinking about experienced freedom in speech. I'm happy to use another word or phrase to talk about the concept we should care about, i.e. feeling and being able to say important things.

But there is no conception that captures all of our intuitions about things we are and aren't free to say; leaving us all free to say absolutely everything we want. In the end all societies can only choose to protect some speech, while necessarily banning others—whether through the law or social pressure—to achieve that goal.

No, we don't want to bring back National Service

For the extremely simple reason that it is slavery to the State:

Prince Harry has called for the country to bring back National Service after revealing his time in the Army 'saved' him.

As he prepares to leave his 10-year military career next month, he has revealed his life could have been different if he had not served in the Army.

He said: “I dread to think where I’d be without the Army.

“Bring back National Service – I’ve said that before. But I put my hand up, as I said to the kids today, you can make bad choices, some severe, some not so severe.

“Without a doubt, it does keep you out of trouble. You can make bad choices in life, but it’s how you recover from those and which path you end up taking.

"I did it because since I was a kid I enjoyed wearing the combats, I enjoyed running around with a rifle, jumping in a ditch and living in the rain, and stuff.

"But then when I grew up, it became more than that, it became an opportunity for me to escape the limelight."

That military service has been good for Prince Harry we're entirely willing to agree (although we would point out that this is rather the purpose of Princes, that military stuff). Similarly, that many who do military service benefit from it we've no doubt at all.

But the imposition of enforced military service upon all is something we're adamantly against. The Army doesn't want it (and as with last time, that's where almost all would end up), we can't afford it (not so much paying people peanuts while they do it, rather the loss of what they would have been doing otherwise) and when we did have it it bred nothing but contempt for the entire society that imposed it.

But hugely more important than any of those practical reasons is the moral one. National Service is slavery to the State. For 18 months, whatever the service period is, they must put aside their lives to become a cog in the designs of the politicians. This is not something that a civilised society does, impose such loss of liberty upon all.

That military service benefits those who volunteer is just dandy. But the important word there is "volunteer". The imposition of conscription upon all, whether military or the various "compulsory community service" options being bandied about is an abhorrence.

In which we find ourselves agreeing with Owen Jones

We found ourselves agreeing with George Monbiot earlier this week and now we find, to our surprise, that we're agreeing with Owen Jones. Must be something in the water:

Being “normal” often means having a complex life. A huge chunk of the population have taken drugs, cheated on a partner, slept with or gone out with someone they regret, been unfair to someone close to them or a stranger. Maybe we committed some misdemeanour when we were younger. Personally I would prefer more MPs with complex backstories, because that makes them more representative and more human. But with the promise – the threat – of unforgiving media intrusion into every last facet of our personal life, why do we expect normal people, with complex lives, to stand for elected office? And then we complain that our politicians are boring on-message robots.

Chuka should have expected it and learned to take it, some will say. It’s all part of the territory. If you don’t want that level of intense scrutiny, choose a different path in life. You saw what they did to Ed Miliband, did you not? What a bleak approach, that the price of political service should be having your life and the lives of those who love you torn to shreds. A mean, cruel, macho, debased political “debate”, stripped of humanity or understanding.

Indeed. The corollary of which is that those who do glide into the higher levels of politics are drawn from the inhuman part of the population, those who never have actually had what the rest of us would consider to be life experience.

Meaning, of course, that we want them to have as little as possible to do with how the rest of us do live our real lives as they've obviously got no clue. Yes, we do need some method of working out who is going to collect the rubbish so there will always be a need both for politics and politicians. But given that, as Jones points out, it's only the nutters and sociopaths who are willing to go through the process of gaining that political power we obviously want that power limited only to those areas where it is absolutely essential.

Thus roll on the minimal, even minarchist, state. As Owen Jones will no doubt shortly agree.