If you tax everyone, send all the money through a bureaucracy, then....
…then you seem to get less of the output that you were originally trying to engineer in the first place. Leading to the conclusion that perhaps government and bureaucracy aren’t the answer to every problem:
Apprenticeships are falling despite the Government’s introduction of a new levy, the Public Accounts Committee has found. The number of apprenticeship starts dropped by 26 per cent after the apprenticeship levy was introduced, the report said.
In the 2017/18 academic year, there were 375,800 apprenticeship starts, compared to 509,400 in 2015/16, the last full year before the apprenticeship levy was introduced.
The apprenticeship levy forces companies with a wage bill of more than £3 billion to pay 0.5 per cent of it to the Education and Skills Funding Agency (ESFA), which is part of the Department for Education (DfE).
The companies have until April 2019 to draw down the funding, which they must use to take on new apprentices, or train existing staff.
The DfE has failed to make the progress it predicted when it reformed the apprenticeships programme two years ago, according to the PAC report.
It didn’t work under the first set of bureaucratic rules, it didn’t work under the second set of bureaucratic rules as reformed. Perhaps the problem is with bureaucracy and tax as a solution?
Which is to ask Thomas Sowell’s question again. “Compared to what?”
Perhaps it is true that there are insufficient apprenticeships in the country. This might be the manner in which all the Technical Colleges, which used to do the day release schemes, are now universities doing full time grievance studies courses. It is, theoretically at least, possible that the helping hand of government has been giving insufficient bureaucratic support to the endeavour to train Britain’s young.
Once you’ve stopped laughing at the back there we might just try observing reality. More government here has led to a worse outcome. The solution therefore is to have less of that government.
We’re often accused of having a slash and burn approach to government itself which is fair enough for we do have a distaste for it as an institution. Sometimes it’s necessary and we’ll put up with that. But we do also insist that the other side of the idea be given more of a hearing. Sometimes - often - government just isn’t the manner of gaining the end goal. Assuming that the goal isn’t just more government. Thus there are myriad tasks and problems we shouldn’t apply the government solution to. This apparently including how to teach the young of the nation to do something useful.
That is, the Telegraph article should read “Apprenticeships are falling because of the Government’s introduction…”
Intellectuals and Property - a non-rivalrous rivalry?
While property is often a defining topic in the centre right, in some cases, it also divides free marketeers and libertarians. This is most clearly manifested by the rivalrous debates on (the non-rivalrous) intellectual property. The Adam Smith Institute’s contribution is the paper ‘Patently Good’ by Ben Southwood which astutely outlines the liberal case for intellectual property.
The most ardent anti-intellectual property regulation ideologues are often driven by the premise that ownership derives from ‘mixing one’s labour’ with the land (homesteading). The argument goes, 'ideas are in essence free goods and, therefore, common property', in this context common property is equated not with collective ownership but with unrestricted access.
Thus if intellectual property is given the same protection under the law as tangible property (at least in principle) it binds all third parties thereby, preventing others from using their property. So, it is a violation of property rights based on the idea that one cannot have a right to the value of one’s property, only its physical integrity.
The issue with this line of reasoning is that the premise of this kind of ownership sounds awfully like the labour theory of value. Which means it sounds awfully wrong. Ownership does not and ought not to arise from one’s material relation to a good or the labour they put into its creation. If it was, we’d be having workers co-operatives left, right and centre. Did someone say proletariat revolution?
Property ownership arises from intersubjective claims on a good such as land. This is evident by the history behind English common law which was shaped by the feudal system of property where all land theoretically belonged to the monarch. Ultimately, property was indivisible in theory but it had several owners and could be bought and sold without altering the property itself. This led to a system which allowed intangible entities such as copyrights and patents to be recognised as forms of property today.
While the idea of ‘property’ is not malleable or an empty vessel it is the end purpose that matters. Its sole purpose is to make lives more prosperous by excluding others rather than being a static bundle of incidents of ownership, thus politics based on ‘public interest’ is not entirely vacuous. This is supported by the consensus that as long as property rights are ‘exclusive, universal, and transferable, they will form the basis of free markets leading to ‘socially optimal outcomes in the aggregate’.
When this purpose of property rights (which works pretty well) becomes blurred, it becomes open to slippery slopes by the political class.
Nonetheless, how do we know what is ‘socially optimal’? First, it is important to note, new ideas are usually great; the total benefit to society of an extra pound of research and development is four or more times the benefit to the firm. But how do we know how much patent strength is most conducive for innovation?
Let me present, your new sick obsession, the Tabarokk curve:
Here, it is important to distinguish between barriers to entry and costs to entry. The former generally discourages innovation while the latter allows economic rents to be reaped. Patents are not strictly a barrier to entry, for a number of reasons.
In medical research, patents provide an incentive to create and trial drugs which usually take an extended period of time. However, paradoxically, such laws often lead to a ‘tragedy of the anticommmons’ as discovered in biomedical research ‘more intellectual property rights may lead to paradoxically fewer useful products for improving human health’.
This is why the Tabarokk curve is a curve and not a straight line. Whilst restricting patents would cause firms to lose some of their monopoly rights, they would also gain the opportunity to use the innovations of others. Furthermore, without patents or copyrights, firms would have an incentive to be secretive and keep crucial information from the scientific and research community, inhibiting further research.
Why not use prizes to incentivise innovation? Well, empirical evidence reveals that they are unsystematic and unpredictable and since they are ex ante rewards, they did not correlate with how useful or popular an invention or innovation was. This proposal seems more motivated by dogma than evidence.
Property, for economists, is too normative and for politicians, it sullies their election victory. It isn’t the sexiest of topics. Nonetheless, it is not a black and white issue. Intellectual property laws, like all laws, exist to be conducive to a prosperous society and they should not be shunned under the pretense of some arbitrary libertarian creed.
Piracy and smuggling helped spark Britain's Industrial Revolution
Why did the Industrial Revolution begin in Britain and not elsewhere? Was it because Britain was an empire with resource-rich colonies? The economic liberalism of the British? Or factors “at home” like institutions, property rights, private property and abundance of coal mines in the North?
All of these factors contributed some extent. But if we think of other places or times with similar underlying features, such as Florence during the 16th century or Holland during the 17th century, we can see that the Industrial Revolution did not develop for these reasons alone. So, there must be more to the story, something that - together with the other factors - produced the Industrial Revolution.
A crucial, underappreciated factor was American demand from the Spanish territories and the associated piracy and smuggling in that part of the world. Without smuggling, the Industrial Revolution may never have happened.
Despite their historical reputation, most pirates did not live off hunting and pillaging ships. Pirates were largely dependent on attacking ports and settlements and facilitating illegal trade. Piracy was very profitable during the 16th and 17th centuries. But, once the British colonies flourished, piracy started being prosecuted more systematically. Traditional piracy declined by the end of the 17th century, leading the pirates to refocus their efforts on the booming smuggling industry. This lead to the Golden age of smuggling.
After the Treaty of Utrecht (1713), Britain was issued an Asiento licence by the Spanish Crown, allowing them to trade with Spanish territories through the South Sea Company - with 4,800 slaves annually for 30 years, and one cargo ship per year. Jamaica was the principal base for operations. This English company was quite profitable, even more so when it was done illegally. It was thought to control as much as one-third of the contraband in the Americas.
Precisely measuring the amount of smuggling is impossible - but historians have estimated that illegal trade by the South Sea Company reached at least 5.5 million pounds between 1730 and 1739. Additionally, there are the unknown figures of what was smuggled by third parties (directly or indirectly related to the South Sea Company), which would increase the total numbers. This is an extraordinarily high amount of money: 5.5 million pounds in 1713 is equivalent of 150 billion pounds today. So we can see the huge impact on the Spanish/American economy as a direct consequence of the contraband of a company like the SSC.
But let’s also consider the economic impact for Great Britain.
What happened when the SSC lost its right to trade in the Spanish territories? Well… the smuggling continued. The area between the Campeche Bay and Costa Rica became a home for illicit trade. It was in the region of Mosquito: 50 to 60 vessels annually sailed from Jamaica towards Belize and during 1762, the year when La Habana was occupied by the British, 96 merchant ships docked there instead of the 3 as was usual. Additionally, the Río de la Plata and the route of Buenos Aires were identified as an ideal way to introduce English manufactures, that would easily reach Peru and Chile.
So while Spain based the commerce between the peninsula and the American provinces in a monopoly system that benefited the monarchy, Sevilla and Cádiz but not much more, Great Britain looked to satisfy the American demand through legal trade, but also more profitably through smuggling.
Between 1740 and 1760, we already find the beginnings of the Industrial Revolution. But in the same time frame, there were other contributing factors:
The Seven Years War (1756-1763), that meant Great Britain annexed Canada from France, and the decline of the French presence in the Caribbean.
The opening of four free British ports in Jamaica in 1765.
The American War of Independence (1776-1783), which meant for GB the loss of the colonies.
The publication of An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith in 1776 and the spread of economic liberalism.
Taking into account this context, if the Industrial Revolution was already ongoing when commerce started being “liberalized” with America opening ports, and when the colonies took their independence, then it doesn’t appear that the Industrial Revolution was caused by economic liberalism alone (even if, for sure, the ideas contributed to its acceleration). Nor is it accurate to say that the Industrial Revolution was caused by the circumstances of the colonies in the north.
So, then, why did the Industrial Revolution happen in Great Britain? Of course, contributing factors as already mentioned as well as money from America used to invest in industries/machinery are to be taken into account. But, above all, it was because Great Britain was the nation that answered most effectively to the existing American demand.
Great Britain detected the growing unmet demand and responded, and it was through regular smuggling that the demand could be fulfilled. This commercial opportunity, provided by the market and the smuggling, led Britain to develop production capabilities and capacity that was essential for the Industrial Revolution.
Dr Lorena Carrasco is at the Universidad Francisco Marroquín (UFM) in Guatemala. She has a PhD in Medieval History and is a member of London Royal Historical Society and Asociación Española de Amigos de los Castillos.
The Great Society
Fifty-five years ago, on May 22nd, 1964, President Lyndon Johnson announced his Great Society program at Ann Arbor, Michigan. Its scope was breathtaking, aiming at nothing less than the total elimination of poverty and racial injustice in the United States.
Fundamentally, it came down to a series of spending programmes that aimed to tackle shortcomings in education, healthcare, transport, and the problems faced by people in cities and rural areas. Johnson had small working parties of about half a dozen people, working in secret so their initiatives would not be “derailed by criticism.” This meant that shortcomings, which might have been recognized and addressed as the programmes were being planned, were not identified and rectified.
In practice this involved vast spending schemes. The “war on poverty” started with a $1 billion appropriation in 1964 and then another $2 billion in the following two years. It involved dozens of programs such as the Job Corps, to help disadvantaged youths develop marketable skills, the Neighborhood Youth Corps, to give poor urban youths work experience, and the Economic Opportunity Act of 1964, designed to help young people from poor homes gain access to job training and higher education.
Its well-meaning, but ill-thought-out, idea was but to help the poor better themselves through education, job training, and community development, and to have them participate in the development of the programmes designed to help them.
It did food stamps, Medicare and Medicaid, and granted billions of dollars for states to spend on everything from educational research to library books and school buses. It provided money for slum clearance and urban regeneration. It tackled every perceived problem by providing vast sums of money to address it. While it undoubtedly achieved some positive results, critics pointed out that its biggest achievement was the creation of a giant bureaucracy that attempted to step into every aspect of American life, and to guide and steer it. They further claimed that the results it achieved were tiny compared to the input of effort and resources. Milton Friedman famously described such state welfare progammes as akin to throwing silver dollars at a barn door in the hope that some would slip though the knot-holes.
Critics from the Left suggested that its shortcomings were down to not enough money being spent, and blamed its failures on the Vietnam War sucking up the funds it needed. In retrospect it was a much-hyped failure, big in intentions, but poor in its outcomes. The monies diverted to fund it could almost certainly have achieved more in terms of economic growth and the opportunities this brings for advancement of poorer and underprivileged people, including ethnic and racial minorities.
The lessons are perhaps that big often doesn’t work, and that small-scale, carefully targetted efforts involving voluntary and private sector participation can be more efficacious. The legacy of the Great Society is with America still, in the form of costly entitlements that cannot be funded in the future, and which all politicians kick down the road for the next generation to solve.
The Greenpeace protestors rather misunderstand the purpose of a company like BP
There’s always an amusement to watching those who have no clue trying to discuss a technical subject. It’s that old joke about the typist trying to use tippex on the screen come to life. So it is with the Greenpeace activist trying to tell us all what should be done with BP. Or what BP should do perhaps:
So what should BP do? It should go 100% renewable, starting with abandoning all of its fossil fuel exploration plans, today, and become part of the solution to the catastrophic problem it has caused.
This is to entirely fail to understand Coase on the existence of the firm - as well as other bits and bobs of economics.
The firm exists to perform a task. The form of that firm will depend upon the task to be undertaken and the technology and structure of the economy around it. Whether a firm even exists - instead of a shifting network of contractors - depends upon those things.
All of which means that if we change the task then that current firm becomes an irrelevance.
We can approach the same point from the other way. BPs varied assets are optimised to the extraction of, transport, refining and marketing, of fossil fuel products. These are all done in markedly different manners than anything to do with renewables. We shouldn’t, wouldn’t and can’t repurpose them to building, say, solar panels. To think that “energy provider” equals “energy provider” is to think that the toy scooter maker should be building jumbo jets - they’re both transport, right?
Further, all that implicit and explicit knowledge within the company is about those fossil fuels. BP actually sold off the division that knew anything about polycrystalline silicon decades back.
If we have some new task that needs to be done then we need that new organisation, in whatever different form, to do that new task. The idea that oil companies should up and build windmills is absurd.
An important day for women
May 21st is an important day for women in the US, because it was on that date in 1919 that the 19th Amendment, extending votes to women, was introduced to the House of Representatives. It passed by 304 to 89, well above the two-thirds required. It passed in the Senate two weeks later, by 56 to 25, two votes over the required two-thirds. It then went to the states for ratification, requiring three-quarters of them to assent before it became part of the Constitution.
Its passage was uncertain, largely because most of the Southern states opposed it - indeed, many rejected it. By March of 1920, 35 states had approved it, one short of the three-quarters needed. It came down to the wire in Tennessee where state legislators were split 48 to 48. The casting vote was left to 23-year-old Harry T. Burn, a Republican. Although initially opposed, it is reported that his mother persuaded him to “do the right thing.”
The Amendment was declared carried in August, and US women finally acquired the dignity of becoming full citizens after decades of campaigning by fearless leaders. Some 8 million women voted in the elections in November.
Women in the UK acquired similar rights in stages. The Representation of the People Act 1918, passed by a coalition government, extended the franchise to all men, and to women over the age of 30 who met minimum property qualifications. In 1928, a Conservative government finally passed the Representation of the People (Equal Franchise) Act giving the vote to all women over the age of 21 on equal terms with men. Women, who had been second-class citizens in almost every culture in history, could now have their say in who was to represent them in the governments of the US and the UK.
May 21st saw another symbolic event for women. On that date in 1932, Amelia Earhart landed in Northern Ireland, having flown solo from Newfoundland. In doing so, she became the first woman to repeat Charles Lindbergh’s epic achievement of 5 years earlier. She had intended to fly to Paris, but a petrol leak forced her to land in a small field in Donegal. It’s reported in the Irish Press that her first request was for a glass of after, after which she casually mentioned, “I have just flown the Atlantic.”
There have been women members of the Senate and Congress, and of the Commons and the Lords. There have been women Presidents and Prime Ministers in several countries. There have been women high achievers, like Amelia Earhart, in many fields and, except in a few countries yet to embrace the modern world, no-one thinks anything of it. But that date, May 21st, marked a symbolic early step.
5G and weather forecasting - there's a solution to this
Over in the United States there’s some mumbling about the use of spectrum for 5G networks. The problem being that the wavelength on offer is very close to that used by certain satellite based weather forecasting methods. We thus have two valuable things which are mutually exclusive - if we believe the complaints of course - so how do we decide between them?
Obviously enough we decide in favour of the one which is more valuable:
He says that while the FCC can switch which regions of the spectrum it allocates to phone companies, forecasters are stuck. That’s because water vapor emits a faint signal in the atmosphere at a frequency (23.8 GHz) that is extremely close to the one sold for next-generation 5G wireless communications (24 GHz). Satellites like NOAA’s GOES-R and the European MetOp monitor this frequency to collect data that is fed into prediction models for upcoming storms and weather systems.
OK, that’s a technical problem that the universe imposes upon us.
If you had a choice between a better, faster cell phone signal and an accurate weather forecast, which would you pick?
The more valuable one. Obviously. Which really just moves us an iteration back, how do we decide which is the more valuable one? The only method we’ve got is price, that determined by willingness to pay. That is, in order to sort this out we auction that spectrum, with those using those satellites and doing the weather forecasting taking part.
For this is the only way that we can work out what is the more valuable use of that scarce resource.
Yes, this system does work, we use it here in the UK. MoD and other such government organisations do have to justify their spectrum use by bidding for it.
Liberty champion’s birthday
John Stuart Mill was born on May 20th, 1806. Although he engaged in many subjects, it is his 1859 essay “On Liberty” that is regarded as the foundation text for all who espouse individual freedom. In that essay Mill justifies the right of individuals to make their own decisions, rather than have these imposed by state power, or social control, or be subject to the will of the majority. The individual, in Mill’s view, must be allowed to be different.
Mill does not base this on any concept of natural or pre-determined rights, but on the favourable outcomes this produces. He justifies liberty on the basis of its consequences, rather than trying to establish it from first principles. Free speech and debate is necessary if we are to achieve the desirable goals of intellectual and social progress. If we silence some opinions, we might be shutting down ones that contain an element of truth. Whereas if we allow free debate, we reinforce our beliefs by having them tested and strengthened. No-platformers should take note.
Mill is adamant that the only justification for exercising power over people is to prevent harm being done to others, and he makes it clear that he means actual violence or the serious risk of it. Causing offence is not enough, upsetting though some may find it. Snowflakes should take note.
There is no justification for interfering with people’s free choices in order to protect them from harming themselves, says Mill. We can advise them about risks, but the choice is theirs if they wish to accept those risks. We can post a sign warning about a rickety bridge, but if people wish to cross it, we have no basis for preventing them from doing so. People gain more from making their own decisions than they do from being made to do what others think is wise. Nanny staters should take note.
Mill stresses the gain we have by allowing divergent practices. We can learn from those that are successful, and learn to avoid those that are not. Why are the European nations so successful, he asks? It comes from “their remarkable diversity of character and culture. Individuals, classes, nations, have been extremely unlike each other: they have struck out a great variety of paths, each leading to something valuable.” Their strength is in their variety, not their uniformity. He observes that “Europe is, in my judgement, wholly indebted to this plurality of paths for its progressive and many-sided development.” European Unionists should take note.
It is part of Mill’s success that freedom has been so highly thought of that when people wish to restrict it in order to achieve other goals, they dress up those other goals in liberty’s language by calling them “real freedom,” or “true freedom.” The truth is that they are not freedom at all. Freedom means making your own decisions about your life and your actions, unrestricted by the arbitrary power of other persons. So long as you do not impose or risk physical harm to others, freedom means that you should be allowed to behave as you wish.
Productivity's important, sure, but why is it important?
The Observer tells us about how Leyland Trucks is driving (sorry) productivity increases somewhere up north of the Marylebone Road:
The enigma of greater efficiency
What is productivity?
Productivity measures the efficiency of an economy by dividing the value of output generated by the inputs employed. The efficiency of the UK workforce is calculated as output per worker, output per job and output per hour.
Why does it matter?
Academics believe productivity gains are vital for improving living standards over the long term. When an economy can create more wealth with fewer resources, the spoils can help pay workers higher wages.
As Paul Krugman has pointed out, productivity isn’t everything but in the long run it’s pretty much everything. But that description of how and why it makes us better off is misleading to the point of being wrong.
We have a limited set of inputs, we are in a world of scarce resources after all. An increase in productivity means that we gain more output from those scarce inputs. Human labour is scarce - sure, there’s a lot of it, but not an unlimited amount - therefore an increase in labour productivity means more is produced from that labour available.
All incomes equals all consumption equals all production, that’s the basic GDP insistence. So, if we’re producing more from our scarce human labour then all incomes and all consumption have risen as well.
That is, we’re not made richer by wages rising, if that indeed happens. We’re made richer by definition if productivity rises. Even if we decide not to increase production but to reduce the labour employed we’re still richer - more voluntary leisure is being richer.
How those new riches get shared out is a secondary question. It being full employment which will lead to the workers getting a cut of it.
The importance of productivity rising is not that wages might rise if something else happens, It’s that by definition the society is richer when productivity rises.
Venezuela Campaign: Cut off Cuban cash to free Venezuela
News has just leaked out of the bravery of a Venezuelan tanker captain who has been arrested by Maduro’s intelligence services for refusing to deliver a cargo of diesel fuel to Cuba. His crew was threatened with court martial and treason charges and forced at gunpoint to deliver the fuel under the command of a temporary captain.
But why did the captain refuse to carry out his orders, and why was an oil shipment to Cuba deemed important enough to justify the attention of the intelligence services?
There is huge resentment in Venezuela of Cuban interference in their country’s affairs. Venezuelans see the Cubans as partly responsible for their suffering, both directly and indirectly. Cuba has been a close ally of the regime for almost twenty years since Chavez and Castro signed a bilateral agreement in 2000 for Cuba to receive oil in return for providing an array of military, inteligence and other services. Cuban intelligence officers have pemeated the Venezuelan military apparatus over the year, as part of a concerted effort by the Maduro regime to prevent a military uprising. Cuba also provided a healthcare programme called Barrio Adentro, using doctors bound to near indentured servitude, but this has largely collapsed.
Without the supervision of the military apparatus by Cuban officers and intelligence operatives, Venezuela’s military would already have relieved Maduro of power. The regime sees Cuba as a guarantor of its survival, and oil shipments to Cuba maintain the deplorable relationship. But those shipments have decreased dramatically as Venezuela’s oil production collapses. Therefore, each shipment has become vital to regime survival, hence the deployment of the intelligence services to ensure the safe passage of oil to Cuba.
The motivations behind Cuba’s relationship with Venezuela are obvious. Cuba is an international pariah and has faced extreme financial difficulties since the Soviet Union collapsed, taking its funding with it. To prop up its own ailing regime, Cuba replaced Soviet subsidies with Venezuelan ones. Therefore, the impending collapse of the Venezuelan state and its dwindling oil production represent an existential threat to the Cuban regime.
Cuba also faces other challenges besides shrinking oil supplies. One of Cuba’s largest sources of foreign currency is its healthcare export programme which brings in some $8 billion per year to the Caribbean nation, most of this revenue generated by approximately 30,000 Cuban doctors serving abroad. The treatment of these doctors is appalling: their families are kept hostage in Cuba, and doctors receive 10-25% of their salaries, much of which is often withheld by the state until their return to Cuba.
Luis Almagro, Secretary-General of the 35 state-strong Organisation of American States, has denounced it as a “modern system of slavery that cannot go unpunished” and a formal complaint has been filed at the International Criminal Court in the Hague, highlighting the crimes of "slavery, persecution and other inhuman acts." A recent BBC investigation has revealed that 57% of doctors surveyed did not volunteer to join a medical mission, but felt obliged to do so, and 91% were watched over by Cuban state security and required to pass on information about colleagues.
Anyone opposed to US intervention in Venezuela should be equally opposed to the ongoing Cuban intervention. Due to the co-dependency between the two states, restoring freedom in Venezuela may well involve restoring freedom in Cuba, a country that has a terrible human rights record and abuses its own citizens. As part of an EU approach, Britain has been promoting investment there in the hope of improving the quality of life of its citizens and promoting reform. However, this has not had the desired effect. The regime takes 95% of the salaries of workers employed by foreign tourist companies, rendering efforts to enrich the general population worthless.
Fixing the Venezuelan crisis will mean tackling the 60 year old Cuban question. Investment in totalitarian regimes does not make them freer, it only gives them more resources with which to maintain the apparatus of repression. A sensible approach would be to clamp down on Cuba’s modern slavery, and to take lawful measures to prevent Maduro sending Cuba any more oil. Regimes will fall when they cease to become profitable for their leaders and their cronies. The Venezuelan regime is already starting to crack amidst a rush of desertions, and there are good prospects that the Cuban one will collapse too.
More information on the Venezuela Campaign can be found on their website.