Much as it pains us to say it, Tony Blair was actually right about the Third Way

Not that we agree with the goal: a high tax and large welfare state society is not something that we desire. Rather, a low tax and richer one where welfare isn't needed to the same extent. But we do find ourselves agreeing with Tony Blair in a manner that we don't with the Corbynites or the Sanderistas. If a higher, or large, welfare state is what you desire it is that third way that can deliver it. Other options, from predistribution through to market rigging just don't work. Another way of putting this is that if National Review have got it then Scott Sumner's message is being heard:

Socialism has two relevant features: Central planning of the economy by political powers and the public provision of ordinary goods (as opposed to public goods such as national defense and judicial systems). This is distinct from welfare-state policies such as those found in the United States, Canada, and Europe. Sweden has a large and expensive welfare state, but it has a robustly capitalistic trade-driven economy that in many ways is more free-market than our own, with lower corporate taxes and fewer trade barriers. The difference between welfare programs and socialism is the difference between food stamps and the state-run groceries that were the bane of the common people’s existence in the old Soviet Union and in modern Venezuela. The former is imperfect, the latter catastrophic.

We would, of course, prefer perfection, as far as that is possible in any human endeavour. A low tax, low welfare society in which the general level of wealth makes public provision for any other than the truly incapable unnecessary. But our message to those who disagree with that idea is that Tony Blair really was still right about that third way. If you do want to do it then you really do have to do what the Nordics have done. Let markets rip (entirely different from allowing capitalism to run amok) and then tax it to produce the transfers.

Another way of putting this is that those who insist that others should have more of what they have should be put to the test. Are you willing to give up what you have that others may have it? If not then perhaps you don't quite believe your rhetoric then, eh?

And a third way of putting this is that redistribution has to be redistribution: the taking from some to the giving to others. And our intuition on this is that those being redistributed from tend to object when it's put in such stark terms. When members of the 1% change their minds on this perhaps we will too.

Or, you know, maybe we won't.

The death of the solar subsidy

This looks like a good idea:

Britain's solar boom is over after ministers announced they would offer virtually no subsidies for people to install panels on their homes.

For there's no actual reason for the UK to offer such subsidies. Despite these claims:

Alasdair Cameron, from Friends of the Earth, said: “From California to China, the world is reaping the benefits of a solar revolution, yet incredibly in the UK David Cameron is actually trying to shut rooftop solar down. “These absurd solar cuts will send UK energy policy massively in the wrong direction and prevent almost a million homes, schools and hospitals from plugging in to clean, renewable energy.” Dr Doug Parr, from Greenpeace, said: "The timing couldn't be worse as the young and potentially booming solar industry is on track to go subsidy free but if these cuts happen, it will be too sudden, too soon and too dramatic. It is highly likely to irrevocably damage the domestic solar industry.”

Solar power has indeed been getting cheaper at a remarkable rate. But it's been absolutely nothing at all to do with any subsidies being offered by the UK government nor any feed in tariffs gouged out of the energy consumers of Britain.

This is not, by the way, anything at all to do with the arguments over global warming exists, whether we need to do something about it nor anything else like that. It's a simple public goods argument. Let us assume that the problem is real and we do want to do something about it. That something being, well, we'd like solar power to become cheap enough to use effectively.

So, should British people have to pay more for their electricity to make this happen?

Nope, they most certainly don't need to at least. How cheap solar becomes will be driven by technological breakthrough. And that will be driven by the wall of money that countries like China, Germany and the US are throwing at it. The technology, when it arrives, will be a public good: we Brits will be able to use it when it arrives just like everyone else will.

So, the correct thing to do is let everyone else spend their money on such subsidies and we install it when it actually works. The removal of the British subsidies makes no difference at all to the date at which this wonder-technology will arrive but it makes us all better off while we wait for it. Thus a good decision.

Owen Jones is entirely right here: refugees' lives matter too

It's not often that we write with unreserved praise for Owen Jones but his piece today deserves it:

As the news of up to 200 dead refugees, drowned off the coast of Libya, filters fleetingly into news coverage, the only guarantee is that more will drown. And with news of more than 70 refugees found dead in a truck in Austria – to try to imagine their last living moments triggers a horrible feeling in the pit of the stomach – we know that more bodies will be found in more trucks. Those of us who want more sympathetic treatment of people fleeing desperate situations have failed to win over public opinion, and the cost of that is death.

For those who believe that hostility to human beings from other countries who lost the lottery of life is somehow hardwired into us, there is evidence to the contrary. Germany takes in around four times as many refugees as Britain does; and for every Syrian asylum seeker received by Britain, Germany gets 27. And despite German generosity comparing starkly with our own, half of Germans polled support letting in even more refugees.

Like Alex Tabarrok, I am not aware of any mainstream moral theory that does not tell us that all humans matter, not just the ones who look like us or were born near us. I often wonder how different our approach to trade and immigration policies would be if we took it as axiomatic we don't just care about people lucky enough to be born in Britain. This is the 'big assumption' I ask people to make when I talk to them about liberalising immigration – and if we made it, the debate about immigration's impact on natives' incomes would be a mere sideshow.

There are valid questions about the most humane policy towards the asylum seekers trying to cross the Mediterranean or English Channel. And I am much more optimistic than Owen about the potential for migration to reduce global poverty. But, as he rightly says, the baseline for all of these debates must change. When people are dying from drowning and suffocation, we have to accept that we are not the only ones who matter.

Ruth Davidson speech to Adam Smith Institute

This week the ASI hosted the feisty Ruth Davidson to deliver a lecture on lessons from Scotland's founding father of economics - Adam Smith - as she outlined her vision of an alternative to the SNP's statist agenda.

Good Evening Ladies and Gentlemen.

Thank you for the opportunity to speak to you this evening.

It seems to me that there is a rather long and – if I might say – inglorious tradition of Scottish politicians hanging speeches round the neck of Adam Smith and his legacy.

I’m sure you’re familiar with them, but – for me – there seems to be two main types.

The first type is what I would refer to as the Gordon Brown method.

The Brown method is where you examine Smith’s philosophy from three hundred years ago and demonstrate that, astonishingly, it coincides almost exactly with your own policy agenda here in early 21st century.

Yes, it turns out that Adam Smith was a kind of New Labour prophet, just waiting to be discovered all this time.

Which shows your current policy platform isn’t a tricksy wheeze to triangulate left and right, all the better to scoop up the votes of middle England. Oh no!

It turns out that it has a “golden thread” linking it right back to the heart of the Scottish enlightenment where, before the words “Tony Blair” were ever heard, it was first discovered that liberal economics and social justice could go hand in hand.

The fact that Smith actually came from Kirkcaldy is just the cherry on top of the cake.

I can only say that if I was Gordon Brown looking for some kind of ballast to hold my political beliefs together, I probably wouldn’t have been able to resist either!

But that isn’t the only type of speech of course. There’s a slightly shabbier version of the Brown method which adds a great dollop of parochialism mixed with hubris.

This is the one where Politician B seeks to assert that pretty much everyone has got Adam Smith wrong from Day One. Apart, of course, from the speaker himself.

And why have they got him wrong?

Broadly speaking, continues Politician B, this is because they are not Scottish.

And, in not being Scottish, they therefore fail to understand the true meaning of Adam Smith.

Target number one is, of course, the Adam Smith Institute.

...

(Read the full speech here.)

Taking Corbynomics seriously...and stop giggling at the back there

One of the joys of Corbynomics is that it's all largely the invention of Richard Murphy. We therefore know that it is wrong on any specific subject, we've just got to work out how it is wrong on any specific subject. Which leads us to the idea that this peoples' quantitative easing will be able to replace the private finance initiative. The idea being that if the Bank of England just prints money with which we can do nice things then we won't have to go off and borrow expensively from the hated bankers and kittens will ride sunbeams once again. The problem with this being that PFI really has very little to do with the price of the finance used to build these lovely things. Sure, bankers get their cut of the interest, as do investors, but that's really just not the point of it all. Instead, the point of PFI is to get some people into state run projects who are worried about losing all of their money. That is, it's really about getting equity partners in.

The point of that being that we all know how projects work out if they are funded by the magic money tree. They come in late, vastly over budget and thus waste vast amounts of real resources. And the only way we've ever figured out how to introduce some rigour into the management of these sorts of projects is to make sure that someone is indeed sweating over the idea that they could lose all their money. PFI is thus far more about bringing the strictures of value for money, completion on time and to budget, into public procurement than it is about either gaining the finance to build something or the price that is paid for that finance.

Thus, changing the price paid for the finance doesn't change the argument in favour of PFI at all. Yes, it's superficially appealing to pay nothing to the Bank of England for the finance rather than 5% to hte City, but compared with things like the 276% cost over run of the Humber Bridge it's not the point at all.

These people are mad

There's always someone willing to take advantage of a good crisis, isn't there?

British railway passengers could be subject to airport-style screening at intercity stations, under plans being considered by the European Union in response to the Arras train attack. Train operators could be obliged to introduce surveillance cameras in every carriage and stations instructed to install scanners for passengers boarding high-speed trains, under options being discussed following the foiled attack. For the first time, Brussels officials are drawing up plans to create common EU rules on railway security. At the moment it is a national competence.

Before deciding whether to let the bureaucrats in Brussels make the rules it's necessary to work out whether the rules themselves make sense. That is, let's test the competence of the proposed rule makers, shall we?

Fortunately we've a method that allows us to do this: cost benefit analysis. Predictions are that soon enough we'll have some 1.4 billion high speed rail passenger movements each year in the EU. So, if we're to scan passengers, that means 1.4 billion passenger scans. Say, given the inevitable queues, this costs each passenger 10 minutes. And let's simply ignore the cost of the scanners and the people to man them. 14 billion minutes, 230 million hours, that's quite a lot of time being spent there. And we should value time at something....the Sarkozy Commission recommended that this sort of time should be valued at "undifferentiated labour rate" or minimum wage for ease of calculation.

230 million hours at, say, 7 euros an hour? That's €1.6 billion euros a year, just in the time spent being and waiting to be scanned. Hmm...and so what's the benefit?

Well, in order for this to be of benefit overall we've got to look at what will be saved. Lives, presumably. And we do know the statistical value of a life. Around and about €5 million in fact. That means, that to be of benefit, these scanners must save 320 lives a year. Each and every year.

Do we have 320 people a year being killed by terrorist attacks on trains? Are we likely to? Not that we can see it has to be said.

So, rather than imposing all of this cost on the good people of Europe it would seem more sensible to simply stay with the system we have. Punch any bearded nutters who start waving AK 47s around. After all, we do have good evidence that the current system works.

If even business doesn't get this then what hope?

One of the standard bits of economics that we need to explain again and again is the incidence of taxes. Corporations don't pay profits taxes, shareholders and workers bear the burden. similarly, business, in the form of a business that uses commercial property, doesn't pay business rates: they fall upon the landlord. But if business itself doesn't manage to grasp this point then what hope of getting everyone else to grasp it?

The Government’s “business tsar” has backed an emphatic call from the nation’s retailers for a fundamental reform of business rates to boost Britain’s productivity. Sir Charlie Mayfield, chairman of the John Lewis Partnership and president of the British Retail Consortium (BRC), has thrown his weight behind a chorus of complaints from the bosses of Britain’s high street traders that the hefty business rates tax is hampering investment in the sector. An overwhelming 95pc of 100 UK retail bosses surveyed by the BRC said that a reform of business rates would boost the nation’s productivity. “Business rates bills have continued to rise when property values have fallen,” Sir Charlie said. “Retailers are now paying £2.40 in business rates for every £1 in corporation tax. Reforming the rates system would be a welcome boost for retailers and help drive investment in training and technology,” he added.

The level of business rates makes no difference at all to the operating costs of those who rent buildings or space. The total rental value is determined by what people are willing to pay to occupy such space. How that is split between landlord in rent and government in rates is irrelevant to that price the occupier will pay. Thus the incidence of the rates is not upon the operating business but upon the landlords.

And reducing taxation upon landlords is not going to make any difference at all to the adoption of technology nor productivity.

What this is is a rather more naked call from landlords that they should be taxed less: any reduction in the rates bill will lead, as above, to their being able to increase rents. And of course there's a few retail chains that own their properties, rather than lease them.....such a reduction in rates would privilege those businesses over others.

We're not so naive as to believe that any part of Britain's taxation system is perfect but business rates are one of the better parts of it as is. Taxing landlords and their rent is closer to a land value tax than anything else and as such is one of the least distortionary taxes and one with the lowest deadweight costs. Don't reduce it.

The suggestion is that Labour should sponsor its own Militant entryism

At least this is how we read this:

Labour leadership frontrunner Jeremy Corbyn has unveiled plans to give grants to working-class party members to help them become MPs to stop it being dominated by people from affluent backgrounds.

Data from his campaign team claims Labour now has more MPs who went to private school – around 12% – than those from manual working backgrounds.

Corbyn would set up a diversity fund to help party members who are shortlisted in one of the top 100 target seats at the next election while they are trying to win selection. Campaign costs can amount to £4,500, his team claims.

We suspect that it will not just be those of working class backgrounds who are aided through the candidate selection process in this manner, but those who hold the correct views. Correct here meaning somewhere over on the magic money tree side of socialist views.

As The Beard pointed out, history runs first as tragedy and then as farce. And some of us are sufficiently greybeard to recall when the Labour Party expended great effort to root out the Militant Tendency. Now the suggestion is that the Labour Party should actually subsidise such entryism.

Yes, there is an element of farce to that, isn't there?

Perhaps we should take Corbynomics seriously?

Given the polling numbers perhaps we should at least think about taking Corbynomics seriously? So, to the fountainhead of all things Corbynomics, Richard Murphy:

This process requires three things. First, high quality economic data on what is really happening in the economy, and far too few economists have any experience with that.

That is rather funny for as we've repeatedly pointed out Murphy has only the shakiest grasp of economic data. However, there's more here. For what he's really saying is that if only the policy makers had more information then they really would be able to plan that economy. Which rather runs foul of the point made in Hayek's Nobel lecture, that we simply cannot get that sort of information out of an economy in anything like useful time:

This brings me to the crucial issue. Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones. While in the physical sciences it is generally assumed, probably with good reason, that any important factor which determines the observed events will itself be directly observable and measurable, in the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process, for reasons which I shall explain later, will hardly ever be fully known or measurable. And while in the physical sciences the investigator will be able to measure what, on the basis of a prima facie theory, he thinks important, in the social sciences often that is treated as important which happens to be accessible to measurement. This is sometimes carried to the point where it is demanded that our theories must be formulated in such terms that they refer only to measurable magnitudes.

It can hardly be denied that such a demand quite arbitrarily limits the facts which are to be admitted as possible causes of the events which occur in the real world. This view, which is often quite naively accepted as required by scientific procedure, has some rather paradoxical consequences. We know: of course, with regard to the market and similar social structures, a great many facts which we cannot measure and on which indeed we have only some very imprecise and general information. And because the effects of these facts in any particular instance cannot be confirmed by quantitative evidence, they are simply disregarded by those sworn to admit only what they regard as scientific evidence: they thereupon happily proceed on the fiction that the factors which they can measure are the only ones that are relevant.

And we also have a certain empirical problem as Cosma Shalizi has pointed out at great length. we do not in fact have a utility function that we can attempt to optimise. And even if we did we'd need another 100 iterations of Moore's Law to be able to run a computer to optimise that function that we don't have.

Both theory and empirics tell us that Corbynism won't work. Simply because an economy is too complex a thing to plan. Therefore, let us not take Corbynomics seriously.

Good grief, this is ridiculous

We're not sure that people understand what they're letting themselves in for here:

The vast majority of people believe alcohol abusers should pay for their own treatment rather than get it free on the NHS, a survey has found. More than half said the NHS should not fund treatment if the illness was a consequence of smoking and patients should be forced to pay for it themselves. The report questioned 4,000 UK adults about the cost of common procedures in the UK and whether it should be publicly funded.

Boozers, smokers and fatties save the NHS money: the costs of treating these various diseases unto death are lower than the lifetime costs of treating people who succumb to other diseases or even just old age. So the basic concept is wrong in itself.

However, there's another problem here. Which is that the health establishment, or at least the majority of the public health bit of it, is convinced that all diseases are caused by someone "doing something". In fact, if you tot up all the numbers, the people who have got cancer, or diabetes, or heart disease, from sugar, salt, smoking, boozing and donuts you end up with more people than there are people actually ill.

Meaning that if this principle were taken seriously, that you don't get NHS treatment for something you've done to yourself, there would be no free NHS treatment at all. Which would be fine for the bureaucracy of course, nirvana in fact: £120 billion a year without having to do anything. But it's not really the point of having an NHS, is it?