Marvel at the effects of a truly unionised workforce
The Guardian tells us that academics in the US have taken to sleeping in their cars, even to indulging in sex work, in order to keep body and soul together. At which point we should marvel at the effects of a truly unionised workforce:
There is nothing she would rather do than teach. But after supplementing her career with tutoring and proofreading, the university lecturer decided to go to remarkable lengths to make her career financially viable.
She first opted for her side gig during a particularly rough patch, several years ago, when her course load was suddenly cut in half and her income plunged, putting her on the brink of eviction. “In my mind I was like, I’ve had one-night stands, how bad can it be?” she said. “And it wasn’t that bad.”
The wry but weary-sounding middle-aged woman, who lives in a large US city and asked to remain anonymous to protect her reputation, is an adjunct instructor, meaning she is not a full-time faculty member at any one institution and strings together a living by teaching individual courses, in her case at multiple colleges.
Adjuncts, of course, are not unionised. But their pay and conditions are caused by unionisation all the same. American academe, for those who gain tenure, is a very comfy gig indeed. Other than forcing oneself upon a student in the quad it's difficult to get fired and while the salary is middling for the professions the working hours and pensions are just great. And the best way to think about tenure is that it is acceptance into a very strong union indeed.
American colleges are not cheap, as we all know, and all the revenue is sucked up by those very well protected and comfy tenured academics and the administrators. Leaving near nothing left over for those adjuncts who carry an ever increasing part of the teaching load.
And why is it that the adjuncts are an ever increasing part? Because the employment of those permanent staff is so expensive given their unionisation. Further, this is what always does happen. Unions benefit those on the inside at the expense of those outside.
American colleges already cost as much as anyone will pay for them. The only solution to the adjuncts' problem is that those in the union get less so they can have more. And, of course, Good Luck with that.
We get it, you did a blog about vaping
I love teasing my friends who use e-cigarettes. There’s something intrinsically uncool about e-cigs – they’re gadgety, a bit silly-looking thanks to their chunkiness and the huge clouds of vapour they produce, and bring to mind the sort of middle aged geezer who hangs around CAMRA beer festivals with a beer checklist. I love to send my friend Dan photos of new vape shops that have silly names like “Vape Lords”, as if he loves vaping so much that he’ll be excited just to see that it exists. The “we get it, you vape” meme came about because vapers often will not shut up about it, which reminds some people of vegans or that guy who tells you he doesn’t even own a TV at every opportunity.
So I understand why people don’t care about vaping and public policy. If you’re not a smoker and haven’t experienced some of the costs of smoking in your own life – a relative dying young from lung cancer, say – it’s easy to just ignore it and laugh about the people who keep hammering on about it.
I was among that group until a few years ago, and thought that the issue was a minor one compared with the weightiest issues in public policy – tax, housing, immigration, Brexit. But nowadays, the more I’ve learned, the more I think that e-cigarettes and related products might be one of the easiest ways to improve people’s lives we have. And if public policy can make them better, and make people more likely to use them instead of smoking cigarettes, then it should be a major priority for people interested in improving human welfare.
Smoking is bad, but…
The first point to note is that smoking tobacco – that is, lighting it on fire and inhaling the smoke – is very harmful. On average, lifelong smokers seem to live for about ten years less than if they had not smoked, and they will be sick more often.
But it is also very enjoyable for many smokers, who judge the trade-offs to be worth it, perhaps because they like the taste or the nicotine. Though it’s important to make smokers aware of the harm that smoking does, most anti-smoking regulation is based on unproven assumptions about smokers’ rationality and ability to compare costs with benefits. I want smokers to be aware of the costs of smoking, and to make sure they bear the costs they impose on others.
But most taxes and anti-smoking regulations are designed to increase the cost of smoking, which unless they are systematically irrational (unproved) is welfare-reducing even if they manage to persuade smokers to stop smoking. In short: only individuals can decide if the pleasure of a lifetime of smoking is worth living for ten years less.
Many anti-smoking policies do not work very well even by their own standards. Taxes do, but indoor smoking bans, display bans, advertising bans and others all seem to do nothing to stop people taking up smoking (though they sometimes do lower smoking rates among current smokers). Plain packaging has been an abject failure in Australia, the only place that has had it long enough for us to measure. And, remember, most of them work by making smokers’ options worse and raising the costs of smoking, not by giving them a better alternative.
E-cigarettes do the job
If some, most or all of the enjoyment of smoking could be delivered with less or none of the harms, humanity would be in luck. Instead of stopping people from smoking by raising the costs of doing so, as most smoking taxes and regulations do, and lowering human welfare, we would be able to lower the number of people smoking (and dying young) while also raising human welfare.
This is the promise of e-cigarettes and other reduced risk tobacco products. E-cigs are much safer than cigarettes. The Public Health England review into them that concluded they were 95% safer was being highly cautious with that figure – the truth may be closer to 99% or 100% safer.
Voluntary uptake of e-cigs since they first came to market has been very rapid and large. Since about 2011, three million people (about 5.6% of the adult population of Britain) have taken them up – one vaper for every three smokers (15.8%, 7.6 million people, smoke cigarettes). Two million of these say that they have used e-cigarettes to quit smoking, and another half a million say they are in the process of doing so, though this number may be somewhat exaggerated as self-response surveys sometimes are.
There are some interesting, though rough and uncontrolled, correlations in smoking and vaping rates that might suggest a relationship that we should be interested in. It was only from 2011 that the smoking rate began to fall quickly again after five years of barely falling at all; and from 2014 there is a sharp drop in under-25s smoking rates right at the same time that there is a sharp rise in e-cig use. That's quite an exciting trend!
The biggest anti-smoking public health groups have come out in favour of e-cigs, with ASH, Public Health England, Cancer Research UK and many others writing to the government to say that “e-cigarettes are the most popular quitting tool in the country with more than 10 times as many people using them than using local stop smoking services”. And fair play to them for that. On their side of the debate, there are people that oppose anything even resembling smoking without good reason for doing so, and giving in to them would have been easy.
Why this stuff matters
What now matters is regulation, where Britain faces some important questions that will determine how much more e-cigs can do. Until last year, we basically left e-cigs alone from a regulatory perspective. There is no legislation (yet) banning their use in public places or buildings, though obviously many places privately choose to ban them indoors (we do at the ASI, during office hours). Advertising as a consumer product is fine, but if you want to make claims about harm you need to get the device regulated as a medical product, which is prohibitively expensive and time-consuming.
There are three questions on the regulatory front that we need to make decisions about. One, after Brexit whether we should continue the Tobacco Products Directive’s rules around things like vape liquid bottle sizes, which make vaping less convenient; two, whether we should change the advertising rules to make it easier for public health campaigners and e-cig companies to advertise the fact that they are much safer than cigarettes (and nearly as enjoyable!); and three, whether we should try to create a regulatory framework for other products that are like e-cigs so that it is easy to bring them to market.
Of these, changing the rules around advertising is probably the most important. The Advertising Standards Agency is currently holding a consultation on this, at the request of public health groups. If they do change the rules the risk is that they only do so in a narrow way, so that e-cigs’ safety can be promoted as part of a stop-smoking campaign but not alongside claims about them being enjoyable, fashionable, or whatever.
The gains are potentially enormous. Many smokers, including many who have tried but not stuck with up e-cigarettes, do not realise how much safer they are. 91% of dual smokers/vapers agreed in a survey that e-cigs were safer, but only 60% of smokers who had not tried an e-cig and 75% of smokers who had tried them but had given them up. 23% of smokers said they hadn't tried an e-cig because they were concerned about safety, and of people who had tried e-cigs but gave them up, 35% said that it was because e-cigs might not be safe enough. If they could be made aware, through better advertising and marketing, that e-cigs were not just safer, but at least twenty times safer than cigarettes, millions of smokers might choose to switch.
To me, one group in particular stands out here. In most age groups, men and women both smoke and vape at similar rates to each other. But in the under-25s group, only 2.6% of women vape compared to 8.9% of men. I do not think it is much of a stretch to assume that the uncool image e-cigs have is part of the reason for this. This age group is particularly important because people who do not become regular smokers while they’re this age are very unlikely to take up smoking in later life. If better and more convincing advertising could be brought to bear to make e-cigs less embarrassing for young women to use, and we merely brought their usage rates up to that of young men, 1.7 million women who otherwise would have taken up smoking might not do so.
1.4 million disability-adjusted life years are lost every year to smoking. Even small shifts from smoking to vaping would have a very large impact in terms of life-years saved. If marketing could make e-cigs less uncool, and make smokers better informed about the safety, the potential gains are huge. The method seems effective, it doesn’t cost us anything, and it’s voluntary, so we’re expanding choice and improving welfare, not just raising costs on a choice we don’t like. For anyone interested in human wellbeing, making public policy more e-cig-friendly seems like it should be a top priority. I even promise to tease my vaping friends less.
If you're going to be at Conservative Party Conference in Manchester next week, you might want to come to our panel discussion on vaping, synthetic alcohol and other ways that innovation is beating the nanny state at its own game. Details here.
We've long been amused by The Guardian's Hardworking Britain column
Frances Ryan writes The Guardian's "Hardworking Britain" column and we've long been amused at the examples being offered to us. It is always, of course, that pay isn't high enough, that people are working fingers to bone and just not, still, having enough to get by upon. Our problem being that numbers just never quite seem to add up.
One example that we explored with her was this:
Mike is frantic about finding money to pay for his multiple medications, but it’s buying presents for his daughters’ landmark birthdays – 13 and 18 this year – that’s playing on his mind.
We reminded her that the NHS charges a maximum fee for all prescriptions over a year. An entire £104 in fact. Her response was that Mike didn't have £104. We never did get a response to our pointing out that the NHS is absolutely delighted to finance this over 10 months.
It is, quite obviously, possible that someone doesn't have £10.40 a month. We think it's unlikely though if someone is far enough up Maslow's Pyramid to be worrying about birthday presents.
Which brings us to today's offering:
Julia has a system to survive. Every month, she maxes out her overdraft: £1,000 in the red to pay for utility bills, council tax, mortgage, and food for herself and her daughter. Then the 49-year-old’s salary puts her back in the black – and she does it all over again.
This is the definition of precarious living: a life where, in Julia’s words, “everyday needs pile up”. The overdraft isn’t enough to keep her head above water. In the past nine months, she’s fallen into £5,000 worth of credit card debt. As we talk, Julia writes it all out – listing basic family costs, item by item: replacing broken furniture (“It was falling apart,” she says); buying her daughter shoes and a uniform for secondary school, and a bike to get there; hiring a plumber to unblock the toilet.
She can’t remember the last time she went out with friends or bought something as a treat. “I have holes in my clothes,” she says.
This is of a teacher earning £34,000 a year. We agree that this is not a fortune. Well, actually, no, we don't. By global standards Julia is in the top 0.5%. Yes, this is adjusting for price differences across geography, we're using PPP here.
As we say, the numbers just never do quite add up. Precarious just isn't the right word, nor is poverty, to describe someone in that top 0.5%.
Seriously, whining about the living standards of one of the richest people to ever have existed on the planet just doesn't strike us as being valid poverty porn. Obviously, things are different at The Guardian.
Fighting (and writing) for consumers and innovation
Over the past week, I’ve been standing up for consumers against Transport for London’s absurd decision to revoke Uber’s private hire licence. At the ASI we will always oppose efforts to stifle innovation and protect incumbents from competition, that’s why I’ve been making the case in the media that Sadiq and TfL should reconsider their decision and restore Uber’s license.
In The Sun I debated Steve McNamara of the London Taxi Drivers’ Association, arguing that the Uber ban is bad news for consumers in London and will harm London’s reputation internationally.
“The reality is that if Uber can't operate in London, people will have to wait longer for cabs, pay much higher prices and some might even put their safety in jeopardy by choosing to walk home after a night out.”
In The Daily Telegraph I echoed Mises and argued that the market is the most responsive democracy of all.
“But, there is a better way to work out what voters really want: check their bank statements. And if you check the monthly bank statement of the average Londoner, you’ll see with over a million trips each week that they’ve cast their sterling votes for Uber and not black cabs.
“And it’s easy to see why. Uber offers a substantially cheaper service, payment by card and shorter wait-times. TfL have censured Uber on the grounds of safety, in particular focusing on the reporting of sexual assaults. That’s a serious issue, but TfL should listen to the women who will always opt for an Uber late at night. Shorter waiting times mean that long walks in search of a main road to hail a cab are no longer necessary, and with every trip logged and tracked by GPS female passengers feel safer.”
And finally for The Times Red Box I argued that TfL’s Uber ban revealed who the real ‘Baptists’ and ‘Bootleggers’ were.
“The Licensed Taxi Drivers’ Association (LTDA) represents the modern-day equivalent of “Bootleggers”. Black cab drivers are opposed to Uber because it is a cheaper, more convenient competitor. Simply put, Uber means less work and lower earnings for black cab drivers. Visible and well-organised interest groups will always have sway over politicians, but any politician who supported banning Uber on the grounds that it would mean higher prices and reduced competition should be rightly pilloried.
“Instead, “Bootleggers” have to rely on “Baptists” to lower the political cost of giving in to naked self-interest. The LTDA are able to hide their financial self-interest behind a range of concerns from workers’ rights to public safety."
Check them out, though if you’re reading this blog I suspect you may already agree.
We entirely agree Dame Margaret, we entirely agree
Dame Margaret, Lady Hodge, tells us that government isn't very good at doing things, a position that we entirely agree with:
Furthermore, the public sector is notoriously bad at both writing and managing the contracts it enters into.
This is, of course, writ small the basic larger problem with calls for government intervention into matters. Most certainly, there are times when only government intervention will do - we're entirely happy with the British state's monopoly on the possession of nuclear weapons in these isles for example.
For the standard switch and bait is to insist that here, look, there's a problem that the market isn't solving. This is thus a market failure - although, a with climate change, it is often the absence of something from market prices, that is the absence of a market rather than a failure of one. Do note though that we agree, there are indeed such things as market failures.
The answer to such not being the usual knee jerk reaction, that government must now do this thing. For there is also something called government failure and we need to take that into account as well in designing whatever the solution might be. For example, as we've mentioned around here before about food banks, government just doesn't seem to be very good at the £10 here, £20 there problems. Private, communal if you prefer, charitable action appears to be very much more efficient at dealing with this specific problem.
That is, we've always got to remember that government isn't very good at doing things.
Ireland finally looks ready to abolish its anti-blasphemy law
This week, Irish Taoiseach Leo Varadkar announced plans to hold a series of referendums in the next two years. One of these referendums concerns Ireland’s outdated anti-blasphemy law, which mandates a maximum fine of up to €25,000 for the “publishing or uttering [of] matter that is grossly abusive or insulting in relation to matters sacred by any religion, thereby intentionally causing outrage among a substantial number of adherents of that religion”.
Whilst nobody has ever been prosecuted under the current legislation (passed in 2009), it nonetheless creates a chilling effect on free speech and makes an ass of the law. The only reason it still exists is to satisfy the requirements of the Constitution of Ireland, and indeed Irish lawmakers have admitted that the 2009 act was designed to render the law practically unenforceable. When actor Stephen Fry was investigated by gardaí earlier this year for alleged blasphemy, former minister Dermot Ahern told the Irish Independent:
We diluted it in a way that made it pretty ineffectual...We implemented the crime but made it in a way that it would be virtually impossible to prosecute.
Ireland’s religious community is equally blasé about the 2009 act. As Kevin Hargaden, Social Theology Officer of the Jesuit Centre for Faith and Justice, explained to the Irish Times earlier this year:
This law was passed as a component of the Defamation Act in 2009. It was not the product of a grassroots movement of Irish Christians or a broad coalition of religious leaders. The Irish Council of Churches did not greet it with applause. No photo opportunity followed with the leaders of Dublin’s mosques. Religious adherents in Ireland did not actively lobby for this law.
Despite the widespread (and accurate) impression that Ireland’s blasphemy law has no teeth, its continued existence has proven to be a useful rhetorical tool for opponents of free speech. Following the Charlie Hebdo massacre, Dr Ali Selim of the Islamic Cultural Centre of Ireland threatened to pursue legal action against members of the Irish media who published cartoons of the Prophet Mohammed: referencing Ireland’s blasphemy laws. And the problems created by the 2009 act aren’t limited to Ireland either:
...the Organisation of Islamic Co-operation - which has 57 member states - cites Ireland’s law as best practice and has even proposed the adoption of its precise wording to limit human rights on freedom of conscience.
Thankfully, with a recent poll showing a clear majority in favour of removing the offence of blasphemy from the Constitution, Ireland looks set to adopt a modern, secular approach to free speech.
Simon Woolley must do his sums again - or we'll send him to bed without any supper
Simon Woolley and The Guardian are telling us all how appallingly white Britain's elite is. This is rather a large campaign by them in fact. One part of which gives us our nomination for the most egregious piece of innumeracy to appear in The Guardian:
But right now, the path to power for minorities is strewn with rocks and hurdles. A BBC study last year – accompanying David Harewood’s documentary Will There Ever Be a Black Prime Minister? – highlighted the fact that 50% of the 2014 intake for Oxford and Cambridge University was taken from five private schools.
Surely one of The Guardian's editors was going to catch that? After all, most of them did go to private schools and then onto Oxbridge. They'd thus have personal experience of the relative sizes of the various institutions.
Just in case it's not hit yet, Oxford seems to admit some 3,200 undergraduates each year, Cambridge 4,300 or so. 50% of that is 3,750 students and we're not even sure that Britain's top 5 schools have that many pupils in total - although we're absolutely 100% certain that their graduating upper sixth doesn't have anything like that in total. We're also absolutely 100% certain that not all people who leave such elite schools manage to get into Oxbridge. The universities are rather more selective than that.
We are given a link to the proof of the contention though, that BBC study:
Four independent schools - Eton, Westminster, St Paul's Boys and St Paul's Girls - and state-funded Hills Road Sixth Form College in Cambridge, together sent 946 pupils to Oxford and Cambridge between 2007 and 2009.
By contrast, 2,000 lower-performing schools combined sent a total of 927 students to the two elite universities, getting less than 6% of available places, the Sutton Trust found.
Hmm. 900 and a bit over a couple of years is 6% of all places granted, therefore 900 and a bit places over a couple of years must be 6% of all places granted. We would therefore say that five schools provide around 6%, not 50%.
Sure, OK, we might call this trivia however delicious it is to point to such innumeracy. But the larger report, as one of us has described elsewhere, suffers from a similarly large failure. Their Colour of Power report compares the BAME population in that governing elite with the BAME population of the nation at large. Yet that governing elite comes from a certain sort of age group - obviously. And the BAME portion of the population varies considerably by age cohort. From some 2% or so in the over 85s to some 21% or so in the under 4s.
No, despite what you might think of Corbyn or McDonnell we do not draw our governing elite from those - and least not exclusively so - crumbling into the grave nor those just learning to open the cookie jar. The general report is as innumerate as this example about Oxbridge entry.
Both we generally and The Guardian in particular should send Simon Woolley back to do his sums again - and no supper for him until he's got them right.
Good grief, can't we at least expect that those who tell us how the country should be run can add up?
Oh well done, Labour decides that those with poor credit should not be allowed to borrow
This is not what they say they want to do of course, they are telling us that this will make credit cheaper for those who find it difficult to get. But the net effect will be to make something currently difficult and expensive into something impossible:
Credit card companies would be forced to write off billions of pounds in long-term customer debts if Labour got into power under a policy to be unveiled at the party's conference.
John McDonnell, the shadow chancellor, will propose capping the amount of money lenders can charge in interest so that no one has to pay back more than double what they borrowed.
He will say the policy will help three million credit card holders who are “trapped by their debt”.
As the Federal Reserve has pointed out over in the US interest rates, just like other prices, are not things we can just randomly assign at our whim. They're actually a bit more important than that:
Even though payday loan fees seem competitive, many reformers have advocated price caps. The Center for Responsible Lending (CRL), a nonprofit created by a credit union and a staunch foe of payday lending, has recommended capping annual rates at 36 percent “to spring the (debt) trap.” The CRL is technically correct, but only because a 36 percent cap eliminates payday loans altogether. If payday lenders earn normal profits when they charge $15 per $100 per two weeks, as the evidence suggests, they must surely lose money at $1.38 per $100 (equivalent to a 36 percent APR.) In fact, Pew Charitable Trusts (p. 20) notes that storefront payday lenders “are not found” in states with a 36 percent cap, and researcherstreat a 36 percent cap as an outright ban. In view of this, “36 percenters” may want to reconsider their position, unless of course their goal is to eliminate payday loans altogether.
We would also point out that if this was applied to debt, rather than simply credit cards, then this would rule out mortgage interest rates rising above 5.5%. No, really, a 30 year repayment mortgage at 5.5 % pays back more than twice the sum borrowed.
Prices, even the price of money, aren't some random digits we can apply as we wish. They're actually the way the world works. Not that we expect John McDonnell to understand this but the rest of us should.
Against rural broadband
Society got very excited about the invention of the car. From the 1950s onwards especially, governments around the world began huge road-building projects, bulldozing swathes of cities for huge multi-lane dual carriageways. This frenzy has subsided, and it's largely clear how this ideological expansion reformed our cities for the worse.
Highways are a crucial part of a nation's infrastructure. Turnpikes—privately-funded and toll-financed roads—were, alongside the private waterways network, a key part of the earliest stages of England's industrialisation. Their high tolls—the rents earned by those who built them—were incentives for the creation and rapid expansion of the world's first, and for a long time the greatest, railway network. So much for natural monopolies: price competition was so vigorous that Mancunian workers and industrialists (and eventually the city corporation) funded a canal that made the city, 40 miles inland, the world's third biggest port.
But it's all too easy to go from thinking something is beneficial in particular contexts to thinking we should expand it indefinitely, even outside of that context. In post-war Britain, infrastructure investment was not driven by the profit motive—it was driven by a conviction that cars were the future. Birmingham is, of course, an especially prominent UK example of this. But it happened almost everywhere, and London was only just saved. The US midwest provides even more extreme examples. Of course, the more heavily roads and parking were subsidised, the more rapidly transit declined.
An insightful short newsletter, which I saw online like a blog post, applies this insight to broadband.
Our rampant enthusiasm for involving computers in everything reminded me of the last century's most important technological revolution, the automobile, which turned out differently than it began. Like computers today, cars were once so novel and promising that we "did the things that let us use cars" rather than the inverse.
That honeymoon period lasted long enough (and for some it hasn't ended yet) to entirely and permanently remake the infrastructure of cities, the most familiar example being the wave of support that enabled Robert Moses to slice New York apart with expressways. By the time the car's real problems became visible—traffic, pollution, physical danger, and social atomization—it was too late to reverse its complete dominance. Most of the rebuilding was already done.
Right now, we're building a digital infrastructure that rivals the physical one we built for cars, just as fast and with equally uncritical enthusiasm. If freeways prioritized cars at the expense of people, this prioritizes bits similarly, no less because we've all begged for it. Of course, it's still too early to say what the internet version of gridlock and global warming will turn out to be once its saturation of society is complete.
In the eyes of this author, it's Zuckerberg and Jobs we should be worrying about, but I'm not sure. See, like private road, rail, and waterways, Facebook and Apple have automatic feedback mechanisms that help guard against both overexuberance and underexploitation: profit. Yes, private firms make crazy decisions, but when they do they get wound down, automatically. They only stay alive, assuming a decent institutional framework, when they satisfy preferences. Uber's venture capitalist investors can only subsidise riders while they have money in the bank. Historically we can see that government-funded boondoggles have not faced this discipline.
So I'm sceptical about the clarion calls I hear absolutely everywhere that we should spend billions of pounds, or hundreds of billions around the world, building broadband because the internet is the "technology of the future". It probably is, but unless we have incredibly solid evidence that broadband has large net positive externalities, then we should let it roll out privately; when people are willing to pay how much it costs society to build. Real technologies of the future fund themselves.
We most certainly welcome this People's Trust Fund, oh yes we do
We think this is an absolutely wonderful idea, the People's Trust Fund. Not, we hasten to add, that we're saying anything at all about how you should invest. Rather, this is going to be the most wondrous test of what we are really pretty sure we know about markets, finance and investment.
As The Guardian says:
An investment fund that promises to break the mould of City short-termism and aims to make gains of 7% a year is to open for small investors able to put in as little as £500.
As they say in a little more detail themselves:
Nobody can be sure what our investment returns will be, but we believe that over a typical seven-year period, our strategy should be capable of turning £100 into £160 – that’s a total return of 7% a year compound, after costs, and assumes that inflation runs at 2% p.a. over the period.1
In terms of your spending power, this is the equivalent of 5% p.a., giving your £100 a value of around £140 after seven years, after inflation.
A 5% real return after costs? That is a remarkable offer. So, how are they to do this?
Well, firstly the investors own the company - so, it's like Vanguard in that sense, a mutual. Secondly, no cash bonuses for anyone, only shares in the fund itself- be interesting to see how the dilution works there. They'll accept investments as small as £500 or even £25 a month. Those logistical costs of management are going to be quite high.
Further good things:
The People’s Trust will also aim to improve lives directly and immediately, by using a small proportion of the fund to lend to charities and community interest companies that have a direct social impact. This is not charity; we expect a modest return on these loans – but you’ll know this money is being used with the aim of doing good in society.
Deliberately lending at modest returns in order to produce a 5% real return.
The day-to-day money management will be done by five fund management groups, which will each be given a seven-year contract to ensure their performance horizon is the same as the underlying investors.
It's a fund of funds, meaning two sets of fund management costs.
The special magic sauce here is that it will be a long term investment fund. Eschewing all short term fads and fancies, along with making sure that everyone pays all their taxes and so on.
That is, an investment strategy that simply hasn't occurred to any of the other half a million people working in The City is, through that fee structure, charitable endeavour and tax insistence, going to deliver a 5% real return to investors.
That would indeed be most welcome - as we know, over the long term managed funds tend to underperform the basic indices precisely because of those management costs. And it would be welcome too, not least for the investors.
But also it would greatly inform the rest of us out here labouring as we do under that efficient markets hypothesis. That known information about prices is already in prices and therefore no one can consistently and long term outperform that market. Or rather, if someone does then they're very definitely a statistical outlier (Warren Buffett doesn't quite count here, his insurance float means that his cost of funds is rather below that of Treasuries, below everyone else's in the market).
This is going to be the most wonderful test of exactly that basic critique of the current investment markets. If it is true that short-termism damages investment returns then this fund has a chance of proving that. Our own supposition is that that's a simple enough idea that someone's had it before and tried it but still, we look forward to the disproof of our contention.