If only Dawn Butler understood the concept of costs

We’d like people to be able to choose their working hours, of course we would. As, obviously, people currently can - we know of no conscription system insisting that all must work particular times. The choice is, largely enough, made at the time the job is chosen rather than within the job but that’s still a choice.

This does not mean that insisting that all can request flexible working is going to work. Especially not when those proposing the idea manage to get it so badly wrong:

A Labour government would give everyone the right to choose when they do and do not work from the day they are employed, its shadow women and equalities secretary will tell Labour’s women’s conference on Saturday.

“Women do the vast majority of unpaid care, but this must not be a barrier to women in work,” Dawn Butler will say. “That’s why I’m announcing Labour’s plans to introduce rights to flexible working from day one of employment.

“This change to the law is essential to closing the gender pay gap and dismantling the structural barriers that hold women back from promotion and progression.”

The granting of the right or not, OK. You know, political decision and all that. But it is necessary to get the effects of it right.

Whether employers should regard flexible working as a cost or not it’s true that they do. So, by adding flexible working - something we’re already saying that women are more likely to ask for - we’re adding to the perceived cost of employing women. This is going to reduce the gender pay gap in what manner? If overall costs of employing a group rise then the more visible, cash only part, of those costs are going to?

“Under Labour’s plans, no woman will be shut out of the workplace because they’re a mum or they care for a parent or a disabled loved one, or both. We need an economy that works for women, not against us.”

Again, entirely super, but is that what is going to happen? Italy, for example, has a low gender pay gap. On the grounds that mothers tend not to work at all. This being one of the things it’s necessary to grasp, this gender pay gap is calculated only for those in work. Those not working at all aren’t totted up. So, excluding those who would be on lower pay from the workforce diminishes the recorded gap.

Please do note here that we’re not arguing either way on the desirability of anything at all. We’re just trying to insist upon people grasping cause and effect. Adding to the costs of employing women with caring responsibilities will widen, not narrow, the gender pay gap.

Carl Menger, founder of Austrian Economics

February 23rd 1840, marked the birth of Carl Menger, a scholar who was to change economics forever. He founded what is now called the Austrian School. His crucial insight was to recognize that price is not based on what it costs to produce goods, as traditional economists had supposed, giving rise to the labour theory of value, on which the edifice of Marxism is built, but on what the demand is for them.

He had observed the difference between what classical economics taught and what actually happens in the real world. He pointed out that in real world transactions, people give up what they value less in order to gain what they value more. In other words, both gain from the exchange, and wealth is created because each participant gains something of more value than they had. The value of middlemen is that they facilitate such transactions. Instead of value deriving from the labour costs of production, as Smith and later Marx supposed, the value of labour derives from the value of the goods it produces.

Menger proposed that goods change hands, not because they are of equal value, but because people value them differently. Value does not reside in the object, deriving from its inputs, but resides instead in the mind of the observer, representing his or her subjective estimation of its worth.

This ‘subjective theory of value’ provoked a frenzied debate because it ran so counter to the prevailing economic view. It was so different from the German mainstream of thought that it was derisively dubbed “the Austrian School,” a name that later became a badge of honour, inspiring the work of subsequent scholars such as Ludwig von Mises and Friedrich Hayek.

Menger also took the view that money facilitated exchange by its role as a common medium, so the baker does not have to pay the cobbler in loaves for his shoes, but can use the convenient intermediary of money. Money developed naturally, like language.

Menger’s analysis acknowledges the way in which people behave in the real world, and that an economy is a process, not an object. It represents the ongoing reality of day-to-day transactions. It cannot be stopped to represent it in equations because its motion is a part of its essence.

It seems astonishing that someone born only three years after Queen Victoria came to the throne in Britain should be so modern in his insight and analysis, and it is a tribute to Menger that the school he founded should be so vibrant today. It is so because he looked at what actually happens, rather than at what theories tell us should happen.

Freedom's Fighters with Linda Whetstone

Dr Madsen Pirie sits down with Linda Whetstone to discuss the decades long fight for freedom she's had a pivotal role leading. Linda is Chairman of the Atlas Network, an international association of free-market think tanks, and of Network for a Free Society. On top of this she is a member of the board of the Institute of Economic Affairs and has been a board member of the Mont Pelerin Society. As the daughter of Sir Anthony Fisher, the founder of the Institute of Economic Affairs, the liberty movement has been a life-long labour of love.

We do rather need to be careful in our definitions

The Food and Agriculture Organisation tells us that biodiversity is declining. This being defined as a bad thing and something that should be dealt with. The problem here is that we rather need to be careful with our definitions. In certain circumstances a decline in biodiversity locally is exactly what we do want, for that’s what allows a global increase in it. Definitions matter.

Over the last two decades, approximately 20% of the earth’s vegetated surface has become less productive, said the report, launched on Friday.

Less productive at what? Supporting biodiversity? That might be something we desire. In the report itself this enlightening line:

.. in many production systems, transition to intensive production of a reduced number of species..

We’ve a name for intensive production of a reduced number of species. Farming. That’s actually what we’re trying to do with the practice, increase the output of selected species as against that of all others from the same area of land. We are deliberately reducing the biodiversity of that field being farmed, that’s the point of the exercise.

That’s also entirely desirable of course. For, the more efficiently, productively, we use each field we do use then the fewer fields in total we need to use. Meaning that more can be - and will be - left for nature to be ever so biodiverse in.

This is the old micro and macro of organic and industrial farming again. Organic allows more species to thrive alongside our food crops. Which is why we need to use more land for our food crops, leaving less for nature than industrialised farming does. We have more micro-biodiversity at the cost of less macro-.

Our definitions here matter. Which sort of biodiversity is it that people think important? Only once we know that can we begin to think through the solutions.

Adam Ferguson’s great insight

Adam Ferguson, who died on February 22nd 1816, was, like myself, a graduate of Edinburgh and St Andrews universities. He was a leading figure of the Scottish Enlightenment, and has a memorial in the East wall of St Andrews cathedral, which I usually visit when I go there. He was a contemporary and friend of Adam Smith and David Hume, fellow members of the Select Society.

He studied civil society and is widely regarded as “the father of modern sociology.” He emphasized innovation and technological progress as more important to growth than capital accumulation, and was a firm believer in the possibility of progress.

His most significant contribution, however, was his recognition that human beings could create, through their uncoordinated actions, outcomes that were never designed or intended. He said:

“Every step and every movement of the multitude, even in what are termed enlightened ages, are made with equal blindness to the future; and nations stumble upon establishments, which are indeed the result of human action, but not the execution of any human design.”

Hayek took up this notion of spontaneous order, pointing out that markets and economies are the product of human activity, but were never designed in advance from any theoretical blueprint. Hayek developed the point further, showing that the spontaneous order of the market is superior to a centrally planned system. It contains far more information that the minds of any planners could hold, and its information is more immediate, incorporating the day-to-day decisions of millions into its ongoing framework. And it is faster to react, Hayek showed, because it does not need to collect the information centrally in order to respond, but does so immediately at the periphery.

A corollary of this is that when people ask if a planned economy is preferable to “random chaos,” they are asking the wrong question. The alternative to an economy planned centrally by a few is one that emerges spontaneously from individual planning decisions made by millions. The answer is, of course, that the latter is superior, not only at the theoretical level explained by Hayek, but in terms of the practical results it has achieved, results far superior to those achieved by any of the ‘planned’ economies.

Ferguson’s great insight, that human beings create viable systems by the interaction of their individual decisions, lies at the heart of market economics. Instead of having decisions made for them by the ‘enlightened’ planners, people can make their own ones, and in doing so contribute to outcomes that satisfy the many instead of fulfilling the aims of the few.

It's how you tell 'em that matters

Tommy Cooper never told a good joke in his life - the manner of his telling them left audiences frantic with laughter. This seems to be advice for the presentation of statistics these days:

Gender pay gap is getting worse in nearly half of firms, analysis suggests, as critics say forcing firms to report is not enough

Umm, wait, you mean it’s not getting worse in more than half of firms?

The gender pay gap is getting worse in nearly half of companies, new analysis suggests, as critics say forcing firms to report their disparity is not enough.

Four in ten private companies that have published their latest gender pay figures have reported wider gaps than last year, according to the BBC.

6 in 10 have not. We take that to be generally getting better rather than generally getting worse ourselves. But that might just be because we can count to 13 without taking our socks off.

But note what happens next:

“We believe that it should be mandatory for employers to publish, alongside their pay gap data, action plans with specific targets and deadlines.”

Sam Smethers, Chief Executive of the Fawcett society echoed those views, and told the Telegraph: “Initial findings look worrying with 40% of those who have already reported showing pay gaps widening not narrowing.

“Women will be wondering what is going on. “We need to require employers to publish action plans that we can hold them accountable to.”

All must be urged on to ever great tractor production all the same. It really is how you tell ‘em that matters.

The abolition of Identity Cards

On February 21st, 1952, Churchill's new Conservative government, which had campaigned under the slogan "Set the people free," abolished National Identity Cards as part of a campaign against regulations and controls.

The cards had been introduced in 1939 as a wartime measure, anticipating the dislocation of the population that would be caused by mobilization and mass evacuation. The postwar Labour government retained them, citing their need for National Service registration, rationing, the Health Service, family allowances, and post-war credits. Post Office clerks who were uncertain of a customer's identity, could demand to see them.

The police fell into the habit of demanding to see them, even for trivial matters such as overstaying one's time in a parking slot. There was a widespread feeling, expressed in Parliament, that this was un-British, and was more redolent of the practices of totalitarian countries. A famous test case aided those campaigning for repeal.

When Clarence Willcock, a dry cleaning manager, was stopped on suspicion of speeding, the police demanded to see his ID card. He refused on principle, and was convicted and fined at a magistrate's court. He took the case to the Court of Appeal, and although the judgement against him was upheld, Lord Chief Justice Lord Goddard commented that the Act was intended for emergency uses, now over, and should not be invoked on trivial matters. He further remarked that demanding production of the card for its own sake tended “to turn law-abiding subjects into lawbreakers, which is a most undesirable state of affairs." Although he upheld the decision of the lower court, he declined to award costs against Mr Willcock.

In 1952 the Conservative Health Minister, Harry Crookshank, announced their abolition, saying, “It is no longer necessary to require the public to possess and produce an identity card, or to notify change of address for National Registration purposes." Police, public officials and counter clerks were instructed accordingly, and told to use other means of identification such as passports, driving licences and season tickets.

I kept my own Identity Card for many decades, battered and worn though it was, as a souvenir of more restrictive times. A Labour government passed an Act in 2006 to reintroduce Identity Cards, pleading national security concerns. Their action engendered a furore of opposition from people determined to act in defence of civil liberties. The pressure group, NO2ID, formed to oppose it, ran a successful campaign, and in 2010 the Conservative-led coalition government repealed the Act, and destroyed the National Identity Register database that it had created.

Yes, another proposal that we should all live on turnips

We bring good news and tidings of joy. It is possible for Europe to feed itself. Even, it is possible for Europe to feed itself in an organic and environmentally friendly manner:

Europe would still be able to feed its growing population even if it switched entirely to environmentally friendly approaches such as organic farming, according to a scientific paper.

A week after research revealed a steep decline in global insect populations that has been linked to the use of pesticides, the study from European thinktank IDDRI claims such chemicals can be phased out and greenhouse gas emissions radically reduced in Europe through agroecological farming, while still producing enough nutritious food for an increasing population.

See, it can be done!

Not that anyone doubted it could be done of course. The question is, as it always has been, do we want it done?

The IDDRI study, entitled Ten Years for Agroecology, used modelling to examine the reduction in yields that would result from a transition to such an approach.

Reductions, the authors argue, could be mitigated by eliminating food-feed competition – reorienting diets towards plant-based proteins and pasture-fed livestock, and away from grain-fed white meat. More than half the EU’s cereals and oilseed crops are fed to animals. The study models a future in which European meat production has been cut by 40%, with the greatest reductions in grain-fed pork and poultry.

We can’t see any evidence that that’s what people do want. Sure, there’s a vocal minority shouting that that’s what should be desired but that’s a different matter. Humans like meat generally and dislike living on turnips. A solution that insists upon a diet of turnips is not achieving that basic human goal, of maximising utility.

There are many things that are possible just as there are a number of things which please people. The trick is to find the ones that are both - not, as here, to find something already rejected. After all, a diet of turnips was common enough around this time of year in Northern Europe for some centuries. We all gave it up as soon as we could. Which is evidence of a certain desire not to go back to it, isn’t it.

Is the US Postal Service fit for business?

Benjamin Franklin was the first Postmaster General in the US. His operation became the United States Postal Service (USPS, often called the "Post Office") on February 20th 1792, when President George Washington signed the Postal Service Act. It has a monopoly of first class mail and of the use of boxes marked "US Mail," but it has experienced troubled times.

It makes losses into the billions of dollars. The latest year's current loss is put at $3.9bn, and it will not make a scheduled $6.9 billion in benefits prepayments. It still owes over $100bn to its retiree health benefits fund.

Part of the problem is that it has failed to adapt to changing times. It no longer makes big business mailing store catalogues, because people look up online what is on offer. First class mail has been replaced by e-mail in many cases. Most bills are now sent electronically, and such periodicals as survive tend to be often read online.

It has failed to adapt because it is big and cumbersome, and because it is run by government, directed to serve political needs to some extent. The same was true of both the German and UK postal services before they were privatized. It is always a critique of nationalized operations that the monopoly gives them captive customers who do not need to be lured by an attractive service, and the state's subsidy is a disincentive to cost-saving efficiencies.

Users of state-run monopoly services in effect pay twice. They pay once for the service itself as they use it, and again as taxpayers when they fund its subsidies and meet its losses. Funds needed for modernization and infrastructure improvement come not from investors, but from a reluctant government that always has more pressing claims on the resources it handles. That is why state-run services usually seem outmoded and old-fashioned. New technology means that people's habits change, and they change faster than the state service can keep up with.

There is a stronger critique of state monopolies, though. It is that their status magnifies the bargaining power of their employees, and enables them to gain benefits that no private firm could afford. Workers can strike, knowing that the government-backed operation will not go bankrupt as a private firm might, They can do so in the knowledge that government will come under pressure from customers anxious to regain their service, pressure that makes giving in to exorbitant demands an easy option. The USPS is struggling to meet the ongoing pension obligations that it conceded. State-run services tend to be subject to producer capture, meeting the needs of those who run them, rather than of those who use them.

The solution is privatization, as it was in Germany and the UK. President Trump is known to be considering this option in the US. When the company has to attract private investment, and to offer a service that customers will prefer to those offered by rivals, and when it has to cut costs where it can to improve its bottom line, only then does it have the incentives that will keep it on its toes.

An insight into how the law is made these days

From the Commons environment committee, telling us about the perils of fast fashion and clothes being cheap enough that even the factory girls can have a change of them:

“In the UK we buy more clothes per person than any other country in Europe. ‘Fast fashion’ means we overconsume and under use clothes. As a result, we get rid of over a million tonnes of clothes, with £140m worth going to landfill, every year.”

That’s from Mary Creagh and the correct response is “To whom?”

Those clothes being landfilled are worth £140 million to whom that is. They’re not worth £140 million to those who threw them away because they’ve just thrown them away - a fairly clear valuation of zero. They’re not worth £140 million to anyone else either as if they were then people would be collecting the clothes so as to gain that value. Outside government circles £140 million is still more than small change after all.

It’s the next bit that shows that not even Creagh thinks they’re worth that sum. For she calls on a tax to be spent in preventing such landfilling. Some reuse or something perhaps. But if we’ve got to use tax money to subsidise the reuse then the reuse isn’t worth the market price, is it? Even if that market price is nothing, entirely freebie.

All the information we’ve got tells us that these clothes going into landfill are worth nothing. So why should we be spending extra money to save that zero value? But sadly it appears that it’s Ms. Creagh who makes the law here, not you or I.