Aditya Chakrabortty's quite right, money talks

One of the things we might fairly accuse the Guardian of, that left which is its readership and production team perhaps, is a failure to recognise what is as opposed to what they think ought to be. Which means that this about face is worth noting:

On the one hand, you have the self-inflating chaos at Westminster, the fever dreams of Jacob Rees-Mogg’s gang and the rehearsed rage of the Democratic Unionists. And on the other, you have the truth nailed by Philip K Dick. “Reality,” he wrote, “is that which, when you stop believing it, doesn’t go away.” So let’s remind ourselves of some reality.

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Even as politicians and the press fantasise about how Britain will leave Europe, big business is already at the departure gate. For Westminster, Brexit is months in the future; for boardrooms making plans, it is the present. Big carmakers have this year halved their investment in new models and factory machinery. The consultancy EY records a 31% slump in the number of foreign businesses setting up headquarters in Britain. Boris Johnson certainly makes good copy – but money talks much louder.

Leave aside the specific example here, that’s just rhetoric, and savour the underlying argument. There’s reality, in which money talks loudly, then there’s politics which can and often does become entirely divorced from that universe outside the debating chamber.

An excellent little point to make about the world. For example, there is no gender pay gap there’s simply a difference in the average manner that men and women organise life after the arrival of children. The UK has not one whit of poverty by any historical or global standard, we have some inequality. Such inequality has fallen in recent years by the standard measures and by proper and realistic ones - measures of consumption after taxes, benefits and government provision of goods and services - is at historical lows. Perhaps companies ought not to pay the management lots of money but they do and societal setups where they don’t have less efficient corporate sectors. Even, Big Tech doesn’t sell data, it just allows advertising to select demographics in exactly the same manner that the Guardian’s jobs page trawls the population that believes none of this paragraph.

All of which rather tells us why we’re not going to see this analysis - money talks, reality matters - spreading to the rest of The Guardian’s pages. For if it did there wouldn’t be a Guardian, would there?
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Future Inventions

In “The Poverty of Historicism” Popper makes the point that the future state of society will be influenced by the knowledge available to it. Since we cannot predict the future growth of our knowledge by rational or scientific methods, we cannot predict the future course of human history. This is fine, and it rules out all claims about history moving towards an inevitable outcome, whether it be the triumph of any particular class, race or nation.

That said, in my doctoral thesis, published as “Trial and Error and the Idea of Progress,” I attribute more to human motivation than Popper does. Not only does it influence which theories we retain or discard, depending on how much they help us, but it also influences the future course of knowledge. Put bluntly, we try to achieve the things we want, and it influences our research and our future knowledge.

I incline to the view that technology is a more effective solution to many of our problems that trying to bring about behavioural changes. I return to a theme I’ve visited before, setting out some of the technological advances that would benefit us, if they could be invented and developed. We do not know if they can, and we cannot predict accurately if they will, but perhaps they will be more likely to come about if people set to work developing them.

I will present a few lists of inventions that I would like to see developed, they are not here yet but if they could be they would be game changers. Below is the first such list; there will be others.

1. I anticipate advances that make mining easier, less life-threatening to its participants, and with less environmental impact — bugs or nanobots spefically tailored to gobble up the coal, copper, manganese or whatever, and sent down to extract the desired material. They will then be flushed out, the desired resource extracted, and all organized by scientists and technicians in white coats who are not exposed to the hazards associated with conventional mining, all without the impact it has on landscapes.

2. Trees engineered to grow exceptionally quickly, so that they mature in a few years instead of decades. Maybe a team will be able to isolate the growth factors and accelerate them, or maybe incorporate the genetic material from fast growing plants into traditional forest trees. The advent of cultured meats raises the prospect of far fewer acres being needed for animal husbandry, and more available for reforestation. It would be good to be able to see extensive tree cover achieved rapidly where we want it, and of course it would constitute a carbon sink.

3. A cancer-inhibiting molecule that recognizes cancerous cells and zeroes in on them and prevents them from growing. Work is already being done on this several microbiology laboratories, and a Nobel prize awaits the team which can do it, along with the gratification of humankind.

4. Genetically engineered bugs that can digest material we would prefer not to clog up our landfills. Some years ago there was a campaign against disposable nappies, such that many local councils employed ‘real nappy officers’ to persuade parents to use cotton nappies instead, despite the energy, bleach and detergent involved. It would be more environmentally friendly to have organisms that can eat up the disposable nappies in landfills. Similarly there are other materials out there that could be mopped up by organisms created for that purpose.

5. A really efficient, low-energy osmotic desalinator. There is plenty of seawater on the planet, but the shortage is of sufficient fresh water where it is needed. With such a machine, anywhere within range of a coast could produce all the fresh water that is needed. It could be piped, as oil and gas are currently piped, to where it is required. We already have thermal desalinators, but they are energy hungry. And present osmotic ones tend to be energy intensive and to clog up with sludge and require expensive maintenance, so we need some new membrane technology to do it efficiently and cheaply.

I will list more of these ‘future inventions’ that might be developed, given human creativity, ingenuity and purpose. All of them would be of huge benefit to humankind, which itself is a good reason in itself for supposing that they might come about.

Ayn Rand Lecture — Dr Michael Kauffman

On Wednesday 14th November, we honoured Ayn Rand and her ideas with a special guest lecture at the prestigious Goldsmiths’ Hall. Dr Michael Kauffman, CEO of Karyopharm Therapeutics and an Objectivist, gave our annual Ayn Rand Lecture on "Reason, Purpose, Self-Esteem: Bringing Lifesaving Drugs to Humankind".

Dr Kauffman has enjoyed a long and successful career in the pharmaceutical industry, where he continues to play a key role in developing life-saving drugs. His current work with Karyopharm involves developing novel oral anti-cancer drugs for multiple tumours. Its first product, selinexor, is in late-stage clinical testing in blood cancers.

Give it a watch now 👇 

Higher prices aren't because costs are higher, they're because they can charge more

Small stores, conveniently located, open all hours, charge more than vast sheds operating at peak efficiency. This shouldn’t be a surprise to anyone, that this happens. We do all, after all, do the bulk shopping in the sheds and top up with what we’ve forgotten at the corner shop. We know it well enough that our habits accord to it.

However, we do need to be clear about why this happens:

Express supermarkets are charging customers up to three times more for their groceries than superstores from the same chain, an investigation has found.

Some fruit and vegetables have a mark up of up to 177 per cent as smaller shops charge more for the same product.

Branded items do not have consistent prices across stores from the same chain either, according to the investigation by the BBC.

The analysis found that a Tesco Express store sold a banana for 25p, while the local superstore sold it at a fraction of the price for 9p.

Similarly at Marks and Spencer, a banana costs 40p in the convenience store and 18p in the big shop.

Only the complete dullards among us don’t know that this is true. But why?

The shops all said the mark-ups were due to smaller shops facing higher operating costs, including higher rents and increased rates for longer opening hours.

No, that’s not it. Costs don’t determine prices - they only determine whether you stay in business given the prices you can charge. Higher prices are charged because people can charge higher prices. Which is a function of competition, nothing else.

Yes, this is an important distinction. It is markets which solve our problems.

East & West, North & South — Real world test labs

Some want us to compare the practical experience of capitalism, warts and all, with some abstract theory of what socialism might be like “if it were done properly.”

It is difficult to compare the two, given that experiments with each have been done at different times, in different places, in different countries, in different cultures. We cannot usually do a “ceteris paribus” because other things are not usually equal, and therefore different outcomes can be attributed to outside variables.

There are, however, two obvious cases where we can see countries of similar background, history and assets over enough time, to give us an approximate laboratory comparison of the outcomes achieved by each system. They are postwar Germany, divided between East and West; and postwar Korea, divided between North and South.

The two parts of Germany and Korea shared broadly similar backgrounds and peoples, but in each case one part of the country followed the path to socialism, while the other allowed its economy to follow the route to free markets and capitalism.

If anything, the North Koreans had the advantage of most of the peninsula’s natural resources, while the East Germans had most remaining postwar industrial infrastructure. The Marshall plan did benefit West Germany a little, but Italy and West Germany received only 10% of it each, while the UK had 25% and France 20%. Economic estimates put the benefit to West Germany of perhaps only 0.5% growth in GDP between 1948 and 1951.

The two split countries showed a striking disparity in economic performance. After Ludwig Erhard abolished price controls and made “a bonfire of restrictions” in a single weekend, West Germany embarked upon the “economic miracle” that soon led it to be Europe’s top economy. Meanwhile the East had to endure endless shortages, poor quality goods, low growth rates and wages.

In Korea, the South embraced markets and capitalism and roared to success as one of the booming “tiger” economies. The North saw starvation and economic stagnation as living standards declined. It was a reasonable like-for-like test of the two systems. In each, one part of the split countries capitalism delivered the goods (literally), while in the other part, socialism simply did not work.

This comparison does not take into account the misery and stunted lives brought about by the totalitarian dictatorships in East Germany and North Korea that accompanied socialist controls. On economic performance alone, capitalism came out as the overwhelming winner in delivering better lives to its people. It affords a salutary lesson.

Once again, to miss the point about health care treatment costs

We seem to have something of a break through in the treatment of peanut allergies:

The first medical treatment for children with peanut allergies is likely to be approved next year but there are concerns about its affordability, even though it consists essentially of peanut flour.

That the treatment exists is just lovely. It’s essentially Mithridates all over again - minor and increasing doses to build tolerance. The idea’s not new - indeed one of us knows a child having this treatment right now.

The complaints about cost have surface validity. It’s just peanut flour so why does it cost £17,000 a year? The answer being because someone had to test this old idea. Lots of people in white coats had to spend years of their lives working on whether it worked, how it worked and whether they could prove it worked.

It’s most appealing to look at the cost of sales of some new thing and demand that some reasonable margin above that is enough. But to do so is to ignore those development costs. Yes, obviously, development costs of something that exists are sunk costs but this is our public goods problem. Non-recovery of sunk costs won’t change, one iota, the value of this peanut allergy cure. But they’ll hugely affect any future intention to invest in solving another of man’s ailments.

The argument that all of this should be publicly funded also doesn’t change the basic calculation. It’ll not even change who pays. If the NHS buys privately developed drugs then the taxpayer pays. If government paid scientists develop the drug then the taxpayer pays. The argument necessarily devolves down to efficiency, a state run bureaucracy does rug development better or worse than a profit driven private sector?

Someone, somewhere, has to pay those development costs. If we use the private sector to do the development then the private sector must be paid those costs - or we’ll not have future private development.

There is no way out of this, no cute trick. Costs of development are costs and they’ve got to be paid somehow.

An Enquiry Concerning Human Urban Planning

Headlines such as ‘The Curse of Urban Sprawl’ are too often presented as virtuous platitudes. It is almost commonplace to look down upon the notion of urban sprawl, but is this the most sound position on an idea which has very practical implications?

One of the reasons why the Viking community was able to expand over three continents with some of the most socially and economically advanced societies of their time, was due to not merely urbanisation but urban sprawl. From ancient cities in Mesopotamia, to London today; expansion of the urban lifestyles has allowed for increased productivity and wealth. It has meant the spread of employment, infrastructure and transport.

Hostility toward urban sprawl is popular amongst academic and political circles. Some colder souls than I might find some hypocrisy in MPs with luxurious country homes and 3 acre back gardens resisting any building around existing train stations in the green belt.

Opposition materialises not only in spurious comments about shanty towns and slums but contemporary policy too. Green belts and zoning are detrimental toward choices people make about where to live in both the negative and positive sense of liberty.  

Let us consider the green belt. Established by the Town and Country Planning Act in 1947, it was intended to hold back urban sprawl and restrict certain development on some land. This meant a restriction of the supply of housing, prices have rocketed and people are left unable to afford their own home.

There are two issues. First, the seemingly ideological resistance to accept urbanisation as an instrument of prosperity, perhaps bolstered by the trade off between politicians’ aforementioned 3 acre back gardens and the freedom and prosperity of those who are not living in urban areas. The second, is the lack of political will to be in favour of allowing high density urban populations to expand out into the fringes. It is this paternalistic attitude which results in others being effectively made to subsidise residential areas outside of the green belt through the construction and maintenance of unnecessarily long winded infrastructure and travel routes.

Urban sprawl may be both qualitative (through the diffusion of the urban lifestyle) and quantitative (through new residential zones) and may appear to be a wooly notion at first. However it is crucial to increasing the wealth of the members of society it affects as people have the choice to move to areas where they, for example, get a promotion. But it has also become fashionable among some on the right to blame sprawl on immigration - that is an entirely separate mammoth of a blog post for a future date.

Some in the anti-sprawl movement do however appear to be well intentioned. Urban sprawl is associated with increased traffic congestion, closely linked to air pollution and the increasing use of cars instead of public transport. However, higher levels of air pollution are associated with higher densities and urban sprawl by definition is the dispersal of the population, thereby reducing the concentration of air pollution and traffic congestion is worse, not better where population densities are higher. Furthermore, travel times have generally decreased overtime (largely due to the use of cars) and increase when urban spaces are restricted from expanding due to unnecessary congestion. The most efficient way of overcoming the issues of an expanding urban centre is not through top down planning but by permitting the market to let people choose where to live.

For some, sprawl is ugly and commutes are tiresome, but that is a trade-off individuals ought to be able to make and not the government. We may love the bucolic rolling hills of the countryside but unnecessarily high property prices have more adverse socioeconomic effects than the cookie cutter uniformity which pleases the eye and benefits the rent-seeking few.

It is a frustrating paradox whereby complaining about urban density is commonplace but calls to take action to increase this urbanisation is fraught with politically impossible propositions. Affordable, comfortable dwellings which people choose ought to be the goal.  Restrictions under the guise of saving us from urban sprawl are at most, mistaken and at worst, virtue signalling and ought to be abolished.

To explain the UN Rapporteur on UK Extreme Poverty

An excellent spot by Rod Liddle here. Philip Alston, the UN’s Special Rapporteur on extreme poverty, has just had a whirlwind tour of the UK where he’s listened to people complaining. He then applied his understanding of the meaning of poverty to these and wrote his report - the UK is very bad at dealing with poverty.

The problem is the definition of poverty being used. We might think of poverty as the World Bank does - less than $1.90 a day. Alston doesn’t, he thinks of it as less than 60% of median household income in that society. The two methods provide entirely different results:

Mauritania is the obvious answer. Its government has been commended by the UN special rapporteur on poverty, Philip Alston, an Australian human rights lawyer. Alston praised President Mohamed Ould Abdel Aziz for having made “significant progress” in tackling poverty, although he added much work was still to be done. So, well done Mo. Some 42% of this hellhole’s population live in absolute poverty, the average yearly wage being less than £1,000. Life expectancy is 20 years below our own and Mo, when not alleviating poverty, presides over a state that murders its political opponents or subjects them to torture. But hell, if it’s a beacon of light for Alston, that’s good enough for me.

Alston’s measure is not one of poverty, it’s one of inequality. So, if you’ve a society without that much inequality, where all are desperately poor, living under a shared burnoose and eating sand, then that’s a place with little poverty. If you have society with more inequality, but the standard of living of the poorest in it is far above the average in that poor place*, then you’ve more poverty.

Well, quite, go figure, but our real problem is that it’s that relative poverty which is our own official definition of poverty. It’s, to put this delicately, an idiot manner of defining things.

*Just a few years back, about a decade, it was true that the average living standard of the bottom 10% of Americans was higher than the average living standard of the top 10% of Indians. Inequality within a society might not matter all that much compared to that statistic. A decade of India’s high GDP growth has made it untrue now but it’s still a fascinating number.

Venezuela Campaign: building crisis cements Maduro's failed legacy

Cement is a vital building material that is largely unavailable in Venezuela due to the collapse of the state-owned cement industry. Venezuela’s massive cement scarcity has resulted in the ruin of the construction industry.

Hugo Chavez nationalised the cement industry to increase production in the ‘strategic’ sector. The Venezuelan assets of the four major private cement companies were expropriated in 2007-8, and construction of a new state-owned cement plant was started in co-operation with Iran. Ten years later this new plant is not yet complete. Chavez merged existing enterprises into the state-owned Socialist Cement Corporation, which controlled 90% of cement production in Venezuela. This move has been disastrous for the industry. Cement production plummeted by 42% from 10.2 million tons in 2007 to 5.9 million tons in 2015. The current economic crisis has reduced production further—many cement plants barely operate.

This has had a deep impact on the construction industry. Octavios Campos, director of the National Federation of Construction Workers, lamented in 2016 that “the unemployment rate is between 70% and 74%” in the industry. Two years later the situation is much worse. According to four Venezuelan unions the construction industry is operating at no more than 5% of its capacity, causing unemployment, economic slowdown and mass migration.

This breakdown can be largely attributed to corruption and mismanagement. Once the cement industry was taken over by the state, military officers and party bureaucrats replaced professional experienced management. They were interested in political control and personal enrichment rather than the long-term health of the industry. Party bureaucrats were also given administrative roles throughout the industry, bloating the companies and eating into margins. 75% of Cemento Cerro Azul’s employees are administrative staff.

Machinery regularly breaks down because of inadequate maintenance and lack of funds to import spare parts; while currency controls and shortage of foreign currency exacerbate every problem in Venezuela. There aren’t enough trucks to transport limestone from the quarries because of the failure of a new state-owned trucking monopoly (Entipisal). At one plant the union reported that of the 30 trucks previously serving the operation, only two or three were working.

Above all, price controls force companies to sell cement at ludicrously low prices, which has enabled the administrators to cash in by selling such cement that is still produced on the black market. National Assembly Deputy Joaquin Aguilar observed: “for every truck of cement that leaves the plant, Cemento Andino receives a little less than 90,000 bolivars while the Mafioso who sells it on the black market gets 1,350,000. That’s why Cemento Andino is a bankrupt company with rich administrators.”

It is thus today nearly impossible for consumers to acquire cement. Chavez destroyed the cement industry by nationalising it and packing it with cronies. The impact on the construction sector and the wider Venezuelan economy has been devastating. The literal building blocks of this once great country destroyed.

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

Health care is a luxury so of course Americans spend more upon it

Health care is a luxury - a luxury good that is. No, not something only the rich can have, rather just something that we appear to spend larger portions of our incomes on as we become richer. So, a richer country like the US should be spending a higher portion of income on health care. Just as it does on other luxury goods.

Now, the claim here is a little rich even for us, that this is the entire and only explanation necessary for US health care spending levels. But we certainly agree with the underlying idea, it’s going to be part of it. And the way to work it out is too see how much of a luxury good health care is, how much would we expect a richer nation to be spending and see if that’s what the US is.

And the U.S., as the country which converts our GDP per capita most efficiently into higher household expenditures is the 4 points on the right of the graph. Do note that U.S. healthcare is there, but it’s under the gray explanatory label.

Here’s the thing: all the models show that U.S. households spend a little more than predicted on everything. Further, we’re probably a bit worse on entertainment than we are on healthcare (both luxuries).

Except the models fit really well, so we’re not talking about big discrepancies here: individual spending on healthcare appears to be too high by about … wait for it … $400 per year.

We’d not say we’re entirely and wholly convinced as yet. Even if we agree the underlying method of analysis is correct. Richer people spend more on luxury goods, health care is a luxury good, the US is richer.

Upon how true this is rather a lot depends. For example, if it’s just this explanation alone then no reform of the system is needed, is it?