Increasing the economic rents purloined from the economy is not big nor clever

Economic rents are the cash that people can extract from the rest of us because they have cornered something. Rarely they come from unfortunate realities - those rare examples of natural monopolies say. More often the opportunity is government created, the result of crass, foolish or corrupt policy making. Running from last to first, say the creation of a legal monopoly and its granting to a court favourite to examples too common to detail to this crasssness about lorries:

Hauliers may be forced to enter a lottery to operate lorries in Europe after Brexit,the government said yesterday.

Guidance published by the Department for Transport (DfT) said “random selection” could be employed to stop the limited number of operator permits being monopolised by the same large companies.

The document suggested that if Britain leaves the EU without a deal then a permit system may be needed in place of hauliers having free access to or from the EU. It is likely that a system run by the European Conference of Ministers of Transport (ECMT) would be used, with only 984 annual permits and 2,832 one-month permits available for British hauliers in 2019.

Quite who decided this, how they decided it and who was stupid enough to agree to the decision is unknown. But there’s that limit on haulage permits. That makes the possession of such a permit something of value. Just as with a taxi medallion. We’ve just watched and applauded in glee as Uber has broken that permit limit and so destroyed the value of that economic rent which was the medallion. Yet as we do so, as we free up and make more efficient the economy, we impose exactly such permit limits upon haulage, creating again those economic rents?

Crass, foolish or corrupt, your choice. But it’s certainly not the way to run a continent nor a country, is it? The deliberate creation of what we normally try to eradicate, market power and economic rents?

That American free trade deal on food sounds great to us

Apparently we cannot have a free trade deal with America that includes food because we might end up with cheap and nutritious yummies on our tables. Ah, no, sorry, that’s not right, is it? We might end up being able to choose which food safety and production standards we insist producers accord to. Nope, still not right.

Ah, yes, that’s it, others will not be able to impose their standards upon our consumption:

Food safety in the UK and public confidence in it will be placed at risk if the government pursues a free-trade agreement with the US, a former Conservative environment minister has said.

If imports of US-standard food were allowed, “you would have a huge decline in food safety,” said Lord Deben, now chairman of the Committee on Climate Change. “Food safety is a huge issue.”

He said the US would stipulate allowing exports of its agricultural products to the UK in any free-trade agreement. “I know this – I’ve negotiated with them, for the whole of the EU,” he told the Guardian.

What is safe food - chlorine washed chicken, HFCS, cheap beef - to be decided by Lord Deben for the rest of us of course. In response an American has said:

The spokesman added: “American food is produced in a different way than food from the EU. The ultimate outcome, however, for the consumer is the same-high quality, safe food at a reasonable price.

“There is a wide range of agricultural techniques used in America. We are a world leader in farmland and products that are certified organic. Ninety-five per cent of US farms are family-owned.

“Consumers can choose to purchase products that are certified as free range, cage-free and cruelty-free if they desire. At the same time, individuals and families who may not able to afford food produced by these more expensive methods have access to a wide range of high-quality, safe, and nutritious food products.”

We cannot see anything wrong with the consumer being King. Those who eat the food being those who decide what standards - and price - the food they put upon their tables must meet.

We can see much wrong with not the consumer making the decision which is imposed upon said consumer. So, free trade - with labelling - in food it is then, sign up with that nice Mr. Trump immediately we’re allowed to through our exit from the EU.

Why not? After all, who is it that is supposed to decide these things in a free and liberal land? Us or them? We people or they rulers?

Primitive Accumulation: Prudent or problematic?

Capital has always been a factor of production. Primitive accumulation, or as Adam Smith called it, ‘previous accumulation’ concerns the origins of production; it is the process by which precapitalist modes of production are transformed into capitalist production.

This idea is central to Marx’s seminal thesis and is used by many to portray the Industrial Revolution as little more than unjust expropriation. The issue with this line of thought is that it presents a merely teleological perspective; seeking to understand the end purpose of capital rather than the conditions required for it to be created. This leads to the mistaken view that the Industrial Revolution was only made  possible because of centuries of exploitation rather any significant innovation. If this ‘capital conspiracy’ were to be the case, why would the exploiters wait centuries to make use of the accumulated capital?

The idea bleeds into contemporary development economics. While capitalism is not tautologous with or sufficient for freedom, it is necessary. Although Marx added the pejorative ‘so-called’ to ‘primitive accumulation’ to emphasize the unjust history that formed the precondition of capitalist production, others accept that capitalist production is what is required for societies to develop. As a result, despite Bauer’s pioneering work on the topic, they continue to purport the misinformed ‘aid, not trade’ dogma.

The goal of most who confront issues of development is sustainability. This naturally requires the continuous accumulation of capital over time. However, large-scale aid initiatives may distort this goal; if the conditions for development arose, capital would be generated locally or become available from external sources such as investors abroad. If however, we assume conditions for capital accumulation are not present, then aid will consequently be less effective as the country would not be able to sustainably render this capital productive.

This then begs the question; what are the conditions for capital accumulation? The answer is (inconveniently for some) not aid but property rights. Economic sovereignty allows for human capital to correspond to and render capital effective to produce goods people want to buy. This is often followed by political sovereignty; if people are allowed the freedom to assemble and trade, democracy follows.

Ex ante expectations of aid are empirically (see southern Italy and most of Africa) and theoretically challenged, and ought to be so until such ideas are prevented from making peoples unnecessarily poorer.

Illness: Prevention and Cure

No one will deny that curing illness is a less good option than not sickening in the first place.  On the other hand, if I secure a scarce GP appointment to deal with some malady, I will not be pleased to have the allocated 10 minutes burned up with a lecture on my lifestyle.  Doctors and their teams are trained to cure people and have precious little time for other, even related, matters. So the DHSC has, sensibly, distinguished three separate, albeit linked, responsibilities: curing (NHS), caring (local authorities) and prevention (Public Health England, part of DHSC itself).

Given that structure, it was strange that the Secretary of State declared today “When I became Secretary of State for Health and Social Care, I made prevention one of my early priorities for the NHS and social care” when those are the two parts of his empire without that responsibility.  He makes no mention of the £7bn or so his department already spends on prevention, still less what benefits accrue.  The picture is confused by separate public health activities also funded by the NHS and local authorities.

The last two centuries saw huge health benefits from sanitation, sewage, inoculations for measles, flu, HIV etc., mostly via local authorities and the NHS, but those have become harder to find. More recent preventive measures (seatbelts, smoking, alcohol) have come from legislation, not any part of the DHSC.

Matt Hancock now exhorts us all to take part in prevention: “We need the whole nation to focus on the future: rising levels of obesity, mental illness, age-related conditions like dementia, and a growing, ageing and diversifying population”.  How exactly am I supposed to prevent nationwide mental illness or age-related conditions or the growing population? Indeed the longer we live in Hancock’s utopia, the more likely we are to suffer from “age-related conditions”.

One has to hope that next year’s Green Paper will provide some evidence for increasing the spending on the public health bureaucracy at the expense of cure and care.  Make no mistake, Hancock is proposing to divert some to the £20bn. announced by the Prime Minister in July as an NHS 70th birthday present to this purpose.

To back up the new policy the DHSC also today published two new and five old case studies. One might have expected some evidence that money spent on prevention would be more than offset by the saving on cure, but no.  Newcastle may show some benefits by 2022 and the Aylesbury case study does not even mention health benefits. It is hard to see how these case studies have any relevance at all.

The prevention paper does cite one source claiming that every £1 spent on prevention gives a £14 social (but not just health) return. This deserves further investigation as it seems unlikely that government should spend all its money on preventing ill health.

The paper in seeking to be all things to all people confuses cure, care and prevention.  Prevention apparently includes “Primary care services include: general practice (GPs or family doctors), community pharmacy, dental, and optometry (eye health) services” (p.31) and how they can be improved by, e.g., booking GP appointments online.

And “The current model of managing multiple, long-term conditions is not best for patients, nor is it sustainable. The barriers to receiving excellent care are well documented and have been covered in various reports” (p.34) addresses how cure and care should be better integrated.  It has nothing to do with public health.

Government has already conceded that cure and care should be considered together and the two Green Papers are due simultaneously this year.  The only thing that today’s announcement makes clear is that prevention/public health should be considered alongside the other two.

It's not capitalism killing the wildlife

Normally the burblings of the lesser minds in academe can be ignored. What does it matter what the students forget in 3 minutes time? There are times though when it’s useful to point out the inanity of what is believed. As with this, blaming capitalism for the disappearance of wildlife:

The latest Living Planet report from the WWF makes for grim reading: a 60% decline in wild animal populations since 1970, collapsing ecosystems, and a distinct possibility that the human species will not be far behind. The report repeatedly stresses that humanity’s consumption is to blame for this mass extinction, and journalists have been quick to amplify the message. The Guardian headline reads “Humanity has wiped out 60% of animal populations”, while the BBC runs with “Mass wildlife loss caused by human consumption”. No wonder: in the 148-page report, the word “humanity” appears 14 times, and “consumption” an impressive 54 times.

....

The WWF report is right to highlight “exploding human consumption”, not population growth, as the main cause of mass extinction, and it goes to great lengths to illustrate the link between levels of consumption and biodiversity loss. But it stops short of pointing out that capitalism is what compels such reckless consumption. Capitalism – particularly in its neoliberal form – is an ideology founded on a principle of endless economic growth driven by consumption, a proposition that is simply impossible.

We;re neoliberals who even think that capitalism is a pretty neat system. Yet we’re entirely unaware of any manner in which capitalism is driven or founded upon any idea of endless growth or consumption.

We agree entirely that people like to become richer, that the poor like to become wealthy. Also that people like to consume, defining being richer as being able to consume more, but that’s nothing to do with capitalism, that’s to do with people. Any economic system at all must grapple with the, err, subject of the subject, us flawed beings out here.

But there’s more to it than this. Capitalism is, often enough, the solution to such environmental ills. As Garrett Hardin pointed out many environmental problems are Commons Problems, a viable solution to which is private ownership of the resource. Capitalism is a system of who owns - private individuals. Cows are privately owned, we’ve not a shortage of them, elephants are not we do.

More even that this there’s the point that capitalism and markets make the modern world possible, the support of us 7 billion humans. Imagine us all without the technologies which the Industrial Revolutions have brought us. We’d be trying to farm at 18th century efficiencies. That is, even with many fewer humans around there’d still be no wildlife at all.

Capitalism can indeed be messy and ugly in its early stages but the one thing ids truly promotes is efficiency, the use of fewer, less, resources to achieve a goal or human standard of living. Meaning that capitalist systems leave more left over for non-human living. As anyone observing the environmental wastelands of either socialism or even hunter gatherers under significant population pressure will be able to see.

It wasn’t after all, the capitalists that did for the Moa, Mastodon or the Dwarf Hippo now, was it?

Venezuela Campaign: the seized means of production

Since the election of Chavez, and the ‘Bolivarian Revolution’ that continues under Maduro, the Venezuelan private sector has been heavily damaged. Twenty years ago, there were more than 650,000 private companies in Venezuela. Today, there are just 140,000, a loss of almost 80%.

The companies that remain are working at less than a quarter of their capacity. In terms of absolute production, only 6% remains of what there was in 1999. Juan Pablo Olalquiaga, President of industry body Conindustria, has described this as “a very important destruction process” and predicted that production will continue to decline while describing the Maduro regime as one “anchored in feudalism.”

The crisis in Venezuela isn’t abating. If anything, it is getting worse. Companies are closing week after week. Colgate Palmolive have halted production at its detergent plant due to a lack of cardboard packaging. Cardboard shortages were directly caused by the government seizure of the Smurfitt Kappa cardboard plant. After the seizure, production ceased.

When plants stop production, they are usually taken over by the government which claims that it will continue operations. But time after time, they fail to keep producing the goods. Earlier this year the Government took over the Kellogs cereal plant after it announced its closure due to “the current economic and social deterioration in the country”. Under Chavista management, the factory has produced no cereal.

The regime’s policies have made it next to impossible for private companies to operate. They can’t freely import raw materials or components. Any products they do make are subject to price controls, often meaning if they did operate they’d make a loss. Businesses have to sell any currency they gain from exports to the Central Bank, and they are subject to a mass of regulations backed by an aggressive and corrupt inspection regime. This is all part of a Chavista plan to substitute private property with state property. In the 2007-2013 National Plan had the explicit aim of “the progressive development of social property over the means of production and the implementation of fair, equitable and solidary exchange systems that are contrary to capitalism.”

But there is nothing “fair or equitable” in the shortages this has produced. Nor in the state’s harassment of private companies, their take over, and shut downs.

The 2014 ‘Law on Organic Prices’ created the National Superintendency for the Defence of Socioeconomic Rights (Sundde) which is tasked with the “consolidation of the Socialist economic order.” With inflation approaching 60,000%, prices have to change constantly if a business wants to survive. But under Article 39 of the law, an inspector can immediately occupy or shutdown an establishment if he accuses it of non-compliance. In 2017 alone, there were 9,341 inspections which resulted in 3 outright expropriations, 12 shutdowns, 10 occupations, 186 confiscations, and 1,189 cases of state-encouraged looting.

The right to private property is a fundamental human right, but the Chavista regime has tried as hard as it can to abolish it. Even now, millions of Venezuelans do not have legal rights to their homes, allowing the regime to do what they like to homeowners. The economic results of all this are not surprising, but still the regime maintains its destructive policies.

There was a telling exchange at an “economic recuperation” conference in Venezuela this week. A Venezuelan Minister said that the key to increased productivity was more state control. Yu Bin, head of the Chinese Government delegation, replied that had not been China’s experience. He stressed that 90% of companies in China are private and that the aim of government policy should be to help them improve their productivity and efficiency. It is a huge shame that the Venezuelan government refuses to take this advice.

More information on the Venezuela Campaign can be found on their website. 

Why assume altruism is the important part of organ transplants?

If you start out with an incorrect assumption then all that follows is going to be in error. As with The Guardian here on the subject of organ transplants:

The altruistic character of organ donation is what makes it valuable – and also what makes it fragile. It is a deeply personal gift, which cannot be compelled.

Why must, or even should, we assume that altruism is the important thing here? It’s entirely true that the basic British assumption is that it is. That money should never sully the transfer of body parts. Which is why people die on dialysis waiting for a kidney, the IVF services float on rivers of Danish sperm. Because it is not just assumed but encoded into law that no one may receive payment for the provision of organs or bodily fluids, gametes and the rest.

It is possible to, as we do, take a different view. To be rather more utilitarian. We wish to save lives - possibly create them - as efficiently as we can. As always, still subject to that do no third party harm caveat. So, why not pay for organs. Iran does, it being the only place that does for kidneys. Iran is also, and not by coincidence, the only place where people do not die upon dialysis waiting for one. The US offers good money for eggs for IVF, they not having as a result a shortage of eggs for IVF.

Incentives do work, that most basic lesson of economics.

The real problems and difficulties are not in the regulations. Individuals and their families must be inspired with a vision of what organ donation can do: it is a way to make both life and death more valuable. Transmitting this vision is a process that takes time and demands commitment and understanding from the frontline staff of the NHS. The change in the law is welcome, but it should not be taken as a substitute for the real work that remains to be done.

Rather than working with the humanity we’ve got The Guardian would rather change the humanity. That’s the New Soviet Man delusion and as with the earlier version people die while we wait for the improved version to turn up.

Sure, gain what we can from altruism but if the supply needs topping up with market incentives then why not? Aren’t we actually trying to save and create lives here? Or is moral stance - posturing - more important?

And do note the moral impertinence here. Those defining the current law are imposing their moral visions on those who get to die of them. Well done, most ethical.

Rather missing the point about public service broadcasters

Of all the puzzling things to demand:

An influential cross-party group of MPs and peers has called on the government to guarantee parliamentary time to create new laws to ensure shows made by the BBC and other public service broadcasters (PSBs) do not get buried on the streaming services of big tech and pay-TV giants such as Netflix and Sky.

In a rare alliance across the political spectrum, nine MPs and peers – including deputy Labour leader Tom Watson, Liberal Democrat baroness Jane Bonham-Carter and the Scottish National Party’s Hannah Bardell – have written to the culture secretary, Jeremy Wright, arguing that if the government is willing to stand up to the tech giants over tax then it also needs to act to protect Britain’s public service broadcasters.

“The digital revolution has brought greater flexibility and choice but if we are not careful the enormous power of the global internet giants is going to sweep traditional PSB television away,” said the letter, timed to mark the joint birthday of the BBC and Channel 4.

The purpose of public sector broadcasting is to produce and provide what the market unadorned will not. That such production is being “swamped” by that market unadorned production shows that we don’t in fact need that public service broadcasting, doesn’t it? People are already able to gain their fill of uplifting documentary and woke agitprop.

Thus this claim for special protections - hmm, what’s that? You say this is ageing bureaucracies, or series of them, demanding privilege, protection, from the upstart whippersnappers who risk showing they’re now irrelevant? Oh, well, that’s fine then, that all makes sense.

Carry on.

Freedom's Fighters with Tim Worstall

Every month the Adam Smith Institute hails one of those who have fought the good fight for freedom over the decades. In this month's Dr Madsen Pirie interviewed our blog maestro Tim Worstall, who visited the UK for the occasion from his rather sunnier climes in Portugal.

Give it a watch now 👇

This is quite true and shouldn't this be a possible choice?

It’s possible to make he Lake Wobegon point here, that we can’t all be at or above the average. Rather more seriously, perhaps this is just the choice that we want to make?

The NIESR’s analysis published on Wednesday suggests the UK has usually opted to spend less on public services and bring in less from taxation as a proportion of GDP compared to other major advanced economies.

It does depend upon which major economies we compare ourselves to. We process very much more of everything through government than the United States does, less than say Sweden - although insisting that, with their populations of the order of the size of London, the Nordics are major economies is a bit rich.

To which the correct response is so what? We are indeed n a democracy, we the people get to choose how we;d like things to be run. And our choice seems to be that we run less of everything through government than some other places.

Quite why, well, one place to go look would be the quality of those who claim to run government for us but that would just be rude, wouldn’t it? Perhaps instead we’ve some cultural attachment to the idea that we should run more of our own lives, they less of our lives. But whatever the reason, the observation is indeed true.

The British have never supported nor been happy with the sort of tax rates, percentages of government in GDP, that applies in some other places. Well, this is simply a fact about the British, isn’t it. A constraint to be worked within rather than something to be overcome perhaps.