It's not that government shouldn't it's that government can't

An interesting conclusion from an attempt to create an industrial cluster:

Every city wants a cluster, a concentration of high-productivity firms and workers beavering away in a particular industry in a particular place. Proximity means ideas and productivity growing and spreading. Who doesn’t want their own Silicon Valley?

David Cameron certainly did. In November 2010, he announced the “Tech City” programme, aiming to grow a digital cluster in Shoreditch, east London. The plan was to use branding to get firms in, networking to ensure those ideas get flowing with focused support for high-potential firms.

But did it work?

That is, obviously enough, the question we’d like answered. Our treasure, taken from us through taxation, was spent upon this plan:

But the policy didn’t raise productivity – for small firms, higher rents may have outweighed the pros of being round lots of other hipsters. More importantly, it’s not clear that the policy drove the cluster, rather than just being a response to it already getting going. As the author puts it: “Instead of catalysing the cluster, policy generally rode the wave.”.

The conclusion? A good bit of PR, yes, but the research reminds us that clusters are born of thousands of decisions by firms and people, which we struggle to understand, let alone influence. If only humans were simpler, policymakers would have a much easier life.

It didn’t work, no. Our resources were spent to no avail unless we’re to regard a bit of PR as worth it all.

We can be more precise as well, in that the same resources, if not wasted in this manner, might have achieved something elsewhere.

Which gives us our outline of what economic planning actually should be. Get the basics right - the rule of law, property rights, a non-crushing taxation system - and leave the rest alone. Such laissez faire also allows government to expend its efforts and our treasure where there is at least the possibility of competence.

It’s not that government shouldn’t try to plan and manage the economy, nor even that they’re just not very good at it. It’s that they can’t. So, don’t.

George Stigler, Nobel laureate

George Stigler was awarded the Nobel Memorial Prize in Economic Sciences on October 20th, 1982. He was one of the hugely influential Chicago School, and was himself influenced by Frank Knight, his supervisor. He also became a lifetime friend of Milton Friedman. Stigler made a modest contribution to the Manhattan Project in World War II, doing mathematical and statistical research for them from his base at Columbia University.

He is principally known for his work on regulatory capture, as it came to be known. Most analysts had previously assumed that regulators acted in the public good to constrain the actions of businesses, but Stigler showed that, in fact, interest groups and political players will use regulation to their advantage, employing legislative power to ensure that the laws are shaped to benefit them. They will lobby to make sure that regulations give advantage to incumbents by making entry more difficult for would-be newcomers. Large established firms have the resources and personnel to handle regulation, whereas small start-up firms usually do not. The theory of regulatory capture forms an important part of Public Choice Theory.

Stigler's landmark article, "The Economics of Information," created a new field of study, the acquisition and use of information. He observed that In most situations information is scarce and costly to obtain, and therefore it can be thought of as an economic good. Acquiring information entails costs and yields benefits, just as does obtaining all other economic goods. People therefore optimize their search for it, but knowledge is asymmetrical. An employer might want an employee ready to learn, for example, but does not know which of the applicants fall into that category. They know, of course, and some of them might acquire a college degree of other qualification that signals their ability to learn to prospective employers.

Stigler's work was in microeconomics, as is the tradition of the Chicago School, and indeed also the Austrian School. He once remarked that he was glad he knew very little macroeconomics, "because it changes once a year." The comment illustrates the wry sense of humour he was noted for. He published spoof articles poking gentle fun at his own profession. His book, "The Intellectual and the Marketplace," proposes "Stigler's Law of Demand and Supply Elasticities," which purports to show that all demand curves are inelastic, as are supply curves.

I often met him through the Mont Pelerin Society. He was one of its founding members, and regularly attended and contributed to its meetings. He served as its president from 1976 to 1978, and was one of the band of scholars that opposed the socialist ideas so prevalent following World War II.

Five years after his Nobel Prize, in 1987, he was awarded the National Medal of Science, an honor bestowed by the President of the United States to individuals who have made important contributions to the advancement of knowledge in scientific fields. He had the satisfaction of living long enough to witness the collapse of the socialist system, one built on false and fanciful ideas that he had spent his academic life opposing and exposing.

It's important to understand what's happening in the environment

To be provocative about it, dead whales in the Thames are a good sign:

A second whale has been found dead in the Thames less than two weeks after a humpback nicknamed Hessy died near the same stretch of water.

No, we are not in favour of dead whales. We are however in favour of there being enough whales around, especially in waters formerly clear of them, that the occasional dead one is found.

For one of the great environmental events of the past few decades is the explosion in the cetacean population in the waters of the world. That the occasional corpse now turns up in London’s river is a victory.

The proper consideration of environmental events is important. For failing to grasp what is happening leads into error:

Some Extinction Rebellion activists present climate warming as a disaster waiting to happen. But for my cousins in the global south, the dystopian future has already arrived. A staggering 12 million people in Kenya, Ethiopia and Somalia are facing hunger caused by low rainfall. Deadly tropical diseases are spreading more easily as the climate warms, and 780,000 people a year are dying in Africa because of air pollution. But for many black inner-city teenagers like me, the climate change movement conjures up nothing but apathy.

Obviously, we were all waiting for the race aspect of the current demonstrations to be raised. Bit consider that litany of suffering in Africa. Those 780,000 air pollution deaths a year.

It is regularly reported - thus should be well known - that this comes from an absence of industrial capitalism, not the presence of it. For the cause of those deaths is the use of wood or dung to cook upon indoors. We will reduce such deaths by more industry, more economic growth, not by the less that XR are calling for.

We entirely agree that a better environment would be a boon to us all. But we do insist that a certain amount of attention be paid to what is a better environment. As well as the evidence that we’ve already made the world better as we have with the whales - you know, moved from a hunter gatherer lifestyle to once where we consume the products of the factories?

Russell Kirk, the sage of Mecosta

Russell Kirk was born in Michigan on October 19th, 1918. He was a revered figure amongst American Conservatives for his scholarly analysis of Conservatism. At a time when left-wing liberals (using the word in its US sense) dominated academe, Russell, together with his friend William Buckley, provided a heavy intellectual counterweight.

After war service, he went to the University of St Andrews and achieved the rare distinction of gaining an earned DLitt degree. It is normally awarded as an honorary degree, but Russell Kirk earned one, the first American to gain one. His thesis was published in 1953 as "The Conservative Mind: from Burke to Santayana," and became an instant classic.

I got to know him when we both taught at Hillsdale College in the mid-1970s. We had the St Andrews connection in common, since I had done a doctorate there, and like him had developed an abiding affection for the place. Russell had written a very engaging book about St Andrews and its history.

At a time in America when liberalism (as they called it) was riding high, Russell outlined in the first chapter of "The Conservative Mind" how he perceived it. It was characterized, he said, by a belief in the perfectibility of man, by hostility towards tradition, by support for rapid change in economic and political systems, and by the secularization of government. Russell, on the other hand, outlined six "canons" of conservatism. They were:

* A belief in a transcendent order, which Kirk described variously as based in tradition, divine revelation, or natural law;

* An affection for the "variety and mystery" of human existence;

* A conviction that society requires orders and classes that emphasize "natural" distinctions;

* A belief that property and freedom are closely linked;

* A faith in custom, convention, and prescription, and

* A recognition that innovation must be tied to existing traditions and customs, which entails a respect for the political value of prudence.

What he was describing was a European strain of Conservatism that had never really taken root in America. To America, founded on the principle of freedom, Conservatism meant preserving the freedoms that the Founding Fathers had established and fought for. Kirk's version of Conservatism seemed to many Americans on the right as more alien, seeking to preserve the values of a culture they had fought against. It seemed elitist and transcendental, rather than libertarian and rooted in the practical world whose challenges Americans had needed to face.

Despite these differences, Kirk was regarded as a sage of the American right, even by those who took issue with his interpretation of Conservatism. At their Mecosta house in Michigan, he and his wife, Annette, were famous for their hospitality, operating a kind of salon, a refuge where right-wing scholars could find a refuge and meet like-minded people.

Kirk has an impish sense of humour. He would tell his guests ghost stories about Mecosta, and was once caught creeping through a secret passage above the guest room to make ghostly noises and bangings above them.

We're not really sure what Polly's point is here

Of course reasonable people can differ on the merits or not of Brexit. It’s just that this reason being given by Polly Toynbee seems to us to be most odd:

As Downing Street asserts through a source to Robert Peston: “Britain is out of all EU laws. We will be able to change our laws in a huge number of areas from product standards to fishing rules and farming subsidies where we are currently bound by EU rules.” Just so. That is precisely what the Europhobes always wanted, the deregulated purpose of the whole Brexit fandango. Food safety and working conditions, traditionally well ahead of UK standards, will now be at the mercy of this Brexit government. Very few in Labour could tolerate that.

The government of the UK is the one elected by the people of the UK. It seems reasonable enough that it should be those people of the UK who get to decide the rules that they’ll live under. This is rather the point of democracy we think.

But to be specific here. With both food safety and working conditions the insistence that “these are the rules” is an agreement, a priori, that people would prefer lower standards. To take that bete noire de nos jours, chlorinated chicken. If British people really don’t want it then if available no one will buy it. It’ll sit on the shelves until it rots and no more will be placed upon the market.

The only justification of a ban on its availability is that some people would in fact like to purchase and consume it. At which point of course what’s the justification for banning what people desire?

So it is with all such bans and standards and insistences. The only justification for “higher standards” however derived - note that this is not exclusively about the EU, or Brexit - is that some useful portion of the people don’t want them. That’s why they must be imposed.

Which leaves us somewhat confused. For that means Polly’s point is she supports any system - EU, Labour, whatever - which ensures that the plebs are controlled into doing what they damn well should be doing. Which can’t, obviously, be right at all. So we’re rather at sea as to what the point is.

[Image credit: Carnivore Style]

The start of the BBC

The BBC began life as the British Broadcasting Company, formed on October 18th 1922. Only in 1926 were the company’s assets transferred to the non-commercial (and Crown Chartered) British Broadcasting Corporation. Shortly after the new company made its first broadcast, John Reith (later Sir John Reith, later Lord Reith) was made its first General Manager.

A Scottish Calvinist, Reith put his moral tone onto everything the BBC did. Anything lighthearted and frivolous was frowned upon, and anything ‘popular’ was treated with suspicious reserve. Reith was determined to avoid what he saw as the free-for-all of American radio, where stations competed to cover events that attracted large audiences, and therefore drew in advertising revenues.

The BBC, when it was a company, never carried paid adverts, but did carry sponsored programmes funded by British newspapers. When it became a corporation, it banned advertising or sponsorship of any kind. The BBC came to be funded out of taxation, called a licence fee, which everyone using a radio, and later a television, was obliged by law to pay, or face criminal prosecution. The advent of the transistor radio in the 1960s killed off the radio licence as unenforceable. 

The BBC maintained a fierce independence, but expressed Reith’s own beliefs. It pretended neutrality in the General Strike of 1926, but banned broadcasts about it by the British Labour Party, and delayed a peace appeal by the Archbishop of Canterbury. Its moral tone reflected Reith’s, banning all mention of sex or infidelity.

Reith’s outlook was firmly highbrow. He believed it was the BBC’s duty to educate its audience into refined, as opposed to popular, tastes. It covered middle and upper class interests, featuring the Oxford and Cambridge Boat races, along with tennis and equestrian events, but severely limited air time covering football and cricket.

The BBC today attracts much criticism. It made a bad judgement that still influences its output, thinking that it could only justify the continuation of its compulsory licence fee if it attracted mass audiences. Once it was competing for listeners and viewers with commercial stations, people questioned whether they should be taxed to provide mass audience shows that were provided at no cost to them by independent stations. The BBC spends a great deal of money trying to win weekend audiences from commercial stations. Had it made its brief public service broadcasting, not readily fundable from commercial sources, it might have made a case on cultural and educational grounds.

A more serious charge levelled today is that BBC personnel, editors, producers and presenters, overwhelmingly represent a narrow metropolitan left wing outlook. Its recruitment adverts are placed in the Guardian, and what it thinks are the only ‘respectable’ views never look beyond the Westminster and Media bubble. Its ‘bubblethink’ pursues a relentless anti-tory, anti-business and pro-EU stance. Its presenters see themselves as a political opposition, interrupting speakers before they can answer questions, and it engages in ‘investigative journalism’ that does not belong in an impartial public service institution.

The BBC licence fee’s days are numbered. It will become a subscription service, and those who do not pay its fees will be disconnected, rather than imprisoned. Its politically correct ‘woke’ agenda might change when it loses viewers and subscriptions from an audience no longer forced by law to fund it. Lord Reith would no doubt turn in his grave at that prospect, where he not already spinning there in disbelief and shame at what his creation has become.

History might not repeat but it does rhyme

The UK has a target to have only electric cars joining the fleet by 2040. The Labour Party would bring this forward to 2030. Which is rather a nice rhyme. From NAM Rodger’s naval history of Britain:

In 1690 Parliament voted money to build 17 Third Rates and ten Fourth Rates, specifycing not only the tonnages, as in 1677, but the number of guns as well. This generated a major problem, for the figures were not based upon actual designs or expert assessment. In particular, it was impossible to build satisfactory eighty-gun Third Rates of only 1,100 tons as the Act demanded…..The result was a bad class of ships: cramped, weak, unstable and overgunned….

…after 1688 innovation in ship design was stifled…

In the long run, a successful Navy needed to combine political support with technical autonomy, but in 1714 the machinery to make this possible did not yet exist.

And apparently not in 2019 either. For Parliament just decided that no new housing should contain gas boilers from 2023 onwards. No, not even if fed on biogas or hydrogen.

That is, having the centre prescribing the detailed technology doesn’t work. On the basic grounds of the ignorance of the centre. Fortunately we did once overcome this problem and so go on to rule the waves. Perhaps we should pick up on that echo and once again avoid the repeat of the mistake?

That is, set the incentives to reach a desired aim but leave the details to people who actually know something?

Einstein and the bomb

On October 17th 1933, Albert Einstein arrived in the United States to stay. He and his wife had been returning to Europe by ship in the Spring, when they heard that Germany had passed the Enabling Act that gave Hitler dictatorial powers. They decided it would be unwise and unsafe to return to Berlin as planned, but went instead to Belgium, and six months later to the United States.

Their precaution was justified, in that they learned that the Nazis had raided their cottage, confiscated and sold his sailboat, and later converted his cottage into a Hitler Youth camp. Einstein accepted an offer from the Institute for Advanced Study, a body that became a haven for refugees fleeing Nazi Germany. Other big-name US universities had minimal or zero Jewish faculty or students at that time.

Einstein’s decision to make America his new home - he became a citizen in 1940 - had deep consequences. A group of Hungarian scientists tried to warn Washington that an atomic bomb might be possible, and might be put together by the Nazis and used against their enemies. Their warning was not heeded, so they tried a more serious effort. Leó Szilárd and Eugene Wigner went to see Einstein to explain the possibility. Einstein, already a known pacifist, had shown that a small amount of matter could be converted to vast quantities of energy, but had never envisaged a chain reaction, or had ever considered the possibility of nuclear energy being harnessed for weaponry. Nonetheless, he agreed to join them, along with Edward Teller, in alerting the White House.

Einstein joined with Szilárd in writing a letter to President Roosevelt, and such was his prestige as a scientific genius that the letter was put into Roosevelt’s hands. He met with Roosevelt, and historians suggest it was that letter and the meetings that led the President to initiate the Manhattan Project, committing immense financial and scientific resources to develop an atomic bomb before Nazi Germany might do so.

Einstein did not participate in the project that saw America successfully make two types of nuclear bomb, and use them to end the war against Japan with far fewer American or Japanese casualties than an invasion would have entailed. He did not comment at the time, but did express regret that the bombs had been used, and had unleashed a new and deadly era of warfare upon the world.

Einstein wrote to Linus Pauling, his old friend, in 1954, a year before his own death. He said, "I made one great mistake in my life - when I signed the letter to President Roosevelt recommending that atom bombs be made; but there was some justification—the danger that the Germans would make them."

He was certainly correct about the last part. The Germans were producing new weapons that took warfare to new dimensions. They produced the V1, the world’s first cruise missile. The launched the V2, the first ballistic missile. And they made the Me262, the first operational jet fighter. They had skilled scientists, and might have produced the atomic bomb. Had they done so, the consequences would have been catastrophic for the world. Einstein’s letter was, in retrospect, a wise precaution.

We entirely agree with Bernie Sanders

Bernie Sanders has hit the nail right on the head here. This is entirely correct:

For too long, these greedy corporate CEOs have rigged the tax code, killed market competition, and crushed the lives and power of workers and communities across America.

Well, OK. perhaps not entirely. But we do agree that killing market competition is a very bad idea. It’s the abnegation of everything that makes an economy work too. Sure there are problems with Bernie’s analysis:

While the corporate profits that presently go to a small number of ultra-wealthy families are at or near an all-time high, wages as a percentage of our economy are near an all-time low.

The American statistical system has its faults. One of which is that overseas profits earned by American corporations are included in that profits number but so also are US profits earned by foreign corporations and persons. This shouldn’t be so, that statistical system isn’t properly distinguishing between GDP and GNI. It’s also true that the wage share isn’t the correct part to be looking at, rather the labour share. Which is wages plus employment benefits (like pensions contributions, health care) and, crucially, taxes paid upon employment like Social Security and Medicaid. And which hasn’t dropped by anything like the amount the wage share has because those health care, pensions and Social Security contributions have been rising.

But OK, monopoly and oligarchy are leading to a less than optimal society. We’d agree that such market power is a bad idea and that more market competition will make the society a better one.

Our problem is with what comes next. Quite how nationalising the entire health care financing system - Bernie does intend to make private sector health care insurance a thing of the past - is an increase in market competition eludes us.

As with so much else that is proposed in fact. We entirely agree that setting the rules in order to foster competition is an excellent proposal. But once that’s done we don’t see how getting that ultimate monopoly, the government, to produce and provide more things improves matters.

Solving environmental problems

The Extinction Rebellion protesters say the world is in crisis, and that emissions must be reduced to zero by 2025. To achieve that would mean we’d have to drive much less, eat much less meat, and use much less energy. We’d rise with the sun and go to bed at sunset. We wouldn’t heat our homes in winter or cool them in summer. We probably wouldn’t fly at all, and certainly not take cruises. We’d have to stop using fossil fuels almost straight away, since their target date is just over 5 years away. Most shipping and freight would have to stop. We’d be eating locally grown turnips instead of mangoes from afar. Most people would never travel abroad.

Fundamentally it’s a programme to abandon the Industrial Revolution and the growth that has lifted most of humankind out of subsistence and starvation. At heart it’s a rejection of the modern world, of its growth, its wealth, its aids to comfort and convenience as well as to survival, and above all to its progress, its science and technology. It is as foolish and misguided as it is unattainable.

The Intergovernmental Panel on Climate Change (IPCC), made up of thousands of scientists from across the world, had recommended that we reduce carbon dioxide (CO2) and other greenhouse gas emissions (GHG) to net zero by 2050.  This would enable us to limit any warming to a maximum of 1.5 degrees Celsius, rather than the billions of dead and the extinction of human life forecast by the current protesters.

There is every chance we can achieve the IPCC goal, and we are already taking steps to do so. We are rapidly phasing out coal for power generation, and replacing it with renewables, using natural gas as a bridge between the two in order to speed up the replacement of coal and oil by renewables. Last year UK electricity was one-third produced by renewables, and the proportion is climbing as solar and wind power become cheaper.

The proportion of electric vehicles increases each year, making it highly likely that petrol and diesel cars, trucks and buses will all be replaced by electric ones well before 2050. We are steadily reducing the energy demands of domestic appliances, and phasing out incandescent bulbs for LED ones.

New methods of carbon sequestration are being developed, and more and more trees are being planted as part of a process of active carbon extraction. Moves are under way to introduce a carbon tax based on emissions, as recommended by the IPCC, and the UK already has a fuel duty set above the recommended level.

Several genetically modified crops are already being grown, ones that increase yield per acre and require fewer pesticides and fertilizers to leach into the environment. New ones are being developed that can grow in otherwise infertile areas, ones currently unavailable because of excess salinity or drought. These developments reduce the pressure on rainforest land, as does the development of hydroponic ‘vertical’ farming that uses minimal land.

It is predicted that within months cultured ‘lab-grown’ meats will be as cheap as those from animals. Their taste and texture are now said to be very good, meaning that mass production can go ahead. Cultured meats do not emit methane, and do not require forests to be cleared to produce animal feed. The same is true of the non-meat alternatives that give vegetable products the taste and texture of animal products.

The plastic problem is being tackled by the increased use of recyclable plastics, and of biodegradable ones. And microorganisms are under development that can feed on the non-recyclable plastic that is already out there.

In short, there is no crisis of extinction. Instead there is a pollution problem, one that is well on the way to being solved. Science and technology have proved more effective than hysteria at achieving this. We do not need to turn our back on the modern world and its prosperity, but can instead continue to drive, to fly, to move humans and freight around, and to eat meat. We do not have to stop doing what we are doing, we just have to do it in different ways.