Catching up fast

Today the Department of Health and Social Care is writing around to ask who can “supply COVID-19 relevant materials and equipment”.  Even asking me. Never mind that they have failed to respond to many offers to date, nor that the South Koreans did all this months ago.  

Whitehall is working night and day on this and should not be rushed.  How likely are 100,000 tests a day this month?

Of course, if you can offer help or resources, do so.

Babes, sucklings and Tory Cabinet Ministers

The Good Book tells us that out of the mouth of babes and sucklings comes strength and or praise, dependent upon the vintage of the part of the book we consult. At which point give us strength at this from a Tory Cabinet Minister:

We’ve waived import duties on medical equipment so the NHS can get supplies faster and more cheaply.

Great that other countries, including the United States and New Zealand are taking similar steps.

Important we work together to keep trade flowing.

Excellent, we can praise that specific action. And yet, why does the Trade Secretary support import duties that make supplies to the NHS slower and more expensive in normal times? Why, in those non-pandemic eras, does the government actively conspire to make that national religion, the health service, worse and the burden of paying for it heavier?

Within the proverbs of economics it is well known that the only fair trade is free trade, that the only rational policy stance is unilateral free trade. It seems something of a pity to have an unbeliever appointed to be the high priest of the process itself.

George Monbiot doesn't actually understand what a market is, does he?

George Monbiot wants to tell us all that the crisis of our times has shown that markets don’t work. Instead, there’s a grand upsurge in people indulging in voluntary cooperation:

You can watch neoliberalism collapsing in real time. Governments whose mission was to shrink the state, to cut taxes and borrowing and dismantle public services, are discovering that the market forces they fetishised cannot defend us from this crisis. The theory has been tested, and almost everywhere abandoned. It may not be true that there were no atheists in the trenches, but there are no neoliberals in a pandemic.

The shift is even more interesting than it first appears. Power has migrated not just from private money to the state, but from both market and state to another place altogether: the commons. All over the world, communities have mobilised where governments have failed.

That’s what the commons, communalism, is, voluntary cooperation. That’s what a market is too, voluntary cooperation.

It’s entirely true that cooperation mediated by money allows transactions with strangers, that the more communal form is necessarily limited to those known. But money is only the token of reciprocation at this level of the analysis - and try existing in a communal system without reciprocating for any length of time. You’ll be somewhere between shunned and an outcast in short order, possibly faster than someone known for not paying in a monetised economy.

To use the favourite journalistic example - given the trade’s experience of the places - the pub. The transaction with the bartender is voluntary and mediated by money. Whose round it is is entirely reciprocal and not mediated by mere cash. Yet the accounting is tracked just as eagerly and the failure to reciprocate - either to pay the landlord or to return the round - noted and the future flow of beer restricted for it.

That commons is a market just one using a non-money transaction form of accounting. How could it be otherwise when a market is the sum of voluntary transactions and communalism is a series of voluntary transactions?

At which point we might well have identified Monbiot’s confusion with the world. He thinks there’s some significant distance between people cooperating and exchanging with each other and people cooperating and exchanging with each other.

As to the death of neoliberalism us neoliberals are all in favour of people cooperating, voluntarily, the heck out of each other. That they’re doing it without the mediation of money bothers us not one jot, tittle nor iota.

Shutdowns must not mean everything shut down forever

A protracted shutdown of so many businesses is seriously bad news—producing lasting disruption, bankruptcies and unemployment. So, when the time is right, how can we get Britain working again?

 The first thing is to set clear aims: a gradual return to normality, with widespread testing of the results, while continuing to safeguard older and vulnerable people.

We can start by reopening businesses that are not classed as ‘essential’ but where social distancing can be managed—like plant nurseries. Maybe even restaurants if staff can be certified as immune and tables can be spaced out. 

People who prove immune can be invited to volunteer in high-risk situations like care homes, hospitals—and schools, which need to re-open quickly so that people in key jobs can get back to work.

 We need better hygiene and deep cleaning in all those places. And in public transport to, while maintaining teleworking where possible.

We should try different re-opening strategies in different areas, letting local officials and businesses decide what is right for them.

We can repair some of the damage done to businesses by axing the regulations that have hampered their response to the crisis. And reducing their taxes. That means government cutting unnecessary projects and bureaucracies. And mothballing the big vanity projects that now simply aren’t an affordable priority.

Business bailouts must not become the norm in normal times

Britain’s government is trying to help businesses through the present lockdown. It has promised loans to companies whose business is interrupted. It has agreed to pay 80% of their wages. And it has extended comparable support to nearly all self-employed persons.

These policies aren’t perfect. Most firms really don’t want to take on more debt. And the loans are hard to get because the banks are not relaxing their lending criteria. They feel that if they make loans easy and customers default, the government won’t bail them out. But unless something gives, a majority of locked-down businesses could fail within three months. Governments should be insurers of last resort, not lenders of last resort.

Likewise, the 80% salary grant is paid only if employees aren’t working. If they get a temporary job—even essential work like helping out food producers—it dries up. It’s paid only if workers do nothing—which wasn’t the idea. And the scheme is already being abused by bad employers who claim the money but actually make staff work from home.

Well, there are times you have to make policy on the hoof. So, such problems occur. The trick is to keep it simple and admit that it won’t please everyone. And set a time limit so people know this really is an emergency measure, not a future way of state-subsidised life.

Public choice economics spotted out there in the wild

Public choice economics simply says that those who govern us, politicians, bureaucrats, all those who inhabit the governing structure, are subject to the same enlightened self interest as the rest of us. They respond to incentives concerning their personal benefit just as the people they are.

Those in favour of ever yet more government action tend to dislike this theory. As if the receipt of a government paycheck negates basic humanity. Yes, easy to joke that clipboard wielders aren’t entirely human but that is a joke.

Worth noting that the idea doesn’t in fact militate against government action per se. It only says that we have to consider those incentives faced by those taking the action and perhaps rejig them so as to reflect the general, rather than specific, benefit.

Given all of that it’s useful to spot people reacting to said economic incentives in managing public policy. Oregon has decided to close the public schools in response to coronavirus. We’re not sure about that action but OK. Then they decided to close the online schools as well. Why would this be?

“Enrollment of new students to virtual public charter schools during the closure would impact school funding for districts across Oregon and therefore may impact the distribution of state school funds and delivery of services as directed under the executive order,” the department said in its guidance to districts.

People might actually like the online schools which are outside the standard public school bureaucracy and this would have funding implications for that standard public school bureaucracy in the future. Note that, observing the incentives faced and not considering the overall sensibleness of the policy, this does make perfect sense. The interest of the bureaucracy is not to have children escaping its tender ministrations therefore it acts to stop children doing so. An entirely rational response considering only that self interest.

There are reports of similar events in other states, Pennsylvania being mentioned more than once.

We thus have an example, out there in the wild, of public choice economics. The people within government take decisions based upon the incentives they face. Again, this does not mean that government should never do anything, it just means that we should be precise in our crafting of those incentives so as to end up with sensible decisions.

Oh, and, of course we also need to be distinctly suspicious of any decisions made until we’ve examined the incentives which lead to them.

We must ensure the cure is not worse than the complaint

My friend Vernon Smith argues that the US economy is not in free fall—just standing still.

Well, he has a Nobel Prize in Economics, but I’m not so sure.

Economies often go up and down, in what economists call business cycles. But look closer, and it is not a case of everything going up, going down, and going up again. In every recession, there are real losses. Business ventures fail, factories are abandoned, people lose their jobs.

That is because, to create goods and services, capital goods—factories, shops, equipment and indeed human talent—have to be brought together, and work together, very precisely. Each part of the capital structure has to work with each other. If one part is disrupted, the whole lot is thrown out of kilter. It takes time, effort, pain and expense to reconfigure it. And things are never quite the same again.

For instance, with retail stores closed, people are turning to online shopping. They are getting used to it: they might even come to prefer it. In time, our high streets will re-open. But their customers may have abandoned them.

Or again, because restaurants are closed, wholesalers are switching their offer from businesses to individuals. When the restaurants re-open, they may struggle to find new suppliers. Some may fail.

In other words, you cannot close down an economy and then expect it to re-open as if nothing had happened. There will to be real losses, real write-offs, real unemployment, just as there are in any recession.

We can only hope that the economic cure does not turn out to be worse than the medical complaint.

We're not convinced by this from James Kirkup

James Kirkup at the Social Market Foundation tells us that businesses which gain support from government in these troubled times should have to sign up to a charter of niceness. Promise not to be nasty in the future given whatever today’s fashionable definition of being nice is.

We spot, just on casual reading, two errors. This:

And in 2006, Parliament legislated to embed in law a significant challenge to the Friedman

view that business has no social responsibility beyond profit. Section 172 of the

Companies Act 2006 remains, to my mind, one of the most important yet under-discussed

laws passed in recent years. It places the directors of limited companies under a new duty

to “promote the success of the company for the benefit of its members as a whole.” In a

sense, the narrow shareholder value doctrine has been disputed in UK law for more than

a decade, though this law has not been given sufficient force to date. (I will return to S172

later in this paper.)

A member of a company is not one of that wider group of stakeholders. A member is not an employees, customer, lender or anything other than a shareholder - members are, in company law, shareholders. Thus the Section 172 claim is that shareholders might have other interests than mere cash. We’re entirely sure they do, something that would not have surprised Friedman either.

There is a much deeper and more important error here though.

Few arrangements or practices can survive the public perception of unfairness, that some

people are undeservingly favoured while more worthy people miss out. Nor are bankers

the only business actors bedevilled by the perception of unfairness. Big tech firms and

(especially) famous coffee chains that are seen not to pay their fair share in tax to the

country where they operate are other examples of how no company is bigger or more

important than the idea of fairness.

The argument is that business will benefit from this new contract that must be signed. For those that don’t - or those that appear not to hew to the principles of it - will suffer as the customer base considers them to be unfair in their actions and thus avoids them.

Which is the very proof that a contract, the legal force, is not required. For if customers do avoid companies they regard as having acted unfairly this will damage those interests of shareholders - members being such recall - and so they will benefit from hewing to those notions of fairness. Greed - or, to borrow a phrase, enlightened self-interest - will ensure that companies act as the public wishes them to. The very diagnosis shows us that the law is not needed.

This all comes from the Social Market Foundation. Perhaps showing us that the qualifier “Social” when added to market is as with “social” when added to justice, or climate to science. The first word rather negating the meaning of the second.

The Lives of Others

Well into week three of home isolation and the temptation to stop work and switch on the TV has never been stronger. In a textbook case of self-justification, I flicked on The Lives of Others as, being in German, it made me feel pretentious enough to not to admit to watching TV during the daytime on a workday.  

The film, however, is brilliant and it is no surprise that it won best foreign language film at the 2007 Oscars, and has been credited as the best-ever German film.

The film is set in Communist East Germany (GDR). The main character is a Stasi officer, Gerd Wiesler (Ulrich Mühe). He is noticeably more committed to the ideology of socialism than many of his colleagues trying to play party politics to climb the greasy bureaucratic pole. Gerd is tasked by one such superior, to spy on playwright Georg Dreyman (Sebastian Koch), who is known for his loyalty to the party, and provide grounds for his arrest. The real aim of the mission is a favour for a government minister who believes his position makes him more deserving of the writer’s girlfriends’ affection. 

Over the course of the film the Stasi officer, observing the life of the writer through the cameras and bugs placed in his apartment, begins to see how his own life of blind obedience seems dull in comparison. He sees how the playwright’s small acts of rebellion against the GDR state serves not the exploitation of the capitalists over the workers. Instead, it demonstrates the oppressiveness of the state which refuses to accept a world of nuance rather than ideological dogma. The officer is torn between his loyalty to the corrupt state and his knowledge that the writer is a good man who does not deserve the punishment that has been planned for him from the beginning. 

Following a tragic storyline, the film shows how communism’s innate totalitarianism and need to quash even the smallest acts of rebellion against the state. It also shows the flawed humans who run a communist state, leading to unnecessary suffering. The state surveillance and intervention into the lives of its citizens results in tragic consequences. 

Of course, we have never known a Stasi in the UK. Yet as the government increases restrictions on our lives, most of them justified to help stop the pandemic, it is important we do not allow more sinister features to emerge.

A recent post by Derbyshire police involved one of their drones filming walkers out on the peak district. Looking more like a clip from the TV show hunted rather than an efficient use of police time, it showed a car park more than half empty along with walkers hundreds of metres apart – clearly at little risk of infection. Yet the baying for people’s blood by many in the comments section is an unnerving reminder how the handing over of oppressive powers can often be a popular one at the beginning.

As Tim Stanley wrote in the telegraph this morning, the attitude needs to remain, “I am happy to stay at home if it helps save lives,” rather than the emerging sentiment, “I will do as I’m told because I’m terrified and the state knows best.” 

While these restrictions on our liberties are necessary at such an extreme time, we must remain vigilant on any unnecessary losses of freedom or surveillance. The tragedy of communism in the past shows the damage these can cause.

Yet perhaps even more important, we as a society must be wary to not fall into the trap of calling for further controls and demanding the crucifixion of those who we believe to be in the wrong. 

Keeping perspective on scientific claims

Most people think that knowledge is solid and unchanging, just waiting to be accessed from the libraries of the world. It isn’t.

What we call ‘knowledge’ is actually no more than our best guess. Take Fred Hoyle’s steady state theory of the universe. Later evidence proved him wrong and gave us the Big Bang hypothesis. But then, that too could be sunk by new evidence arriving tomorrow.

When COVID-19 broke out, nobody knew whether it was a terrifying killer, or a mere nuisance. Governments pursued different strategies based on different guesses. Imperial College London, for example, figured that a third of Britain’s population were already infected and 250,000 people could die. Then Oxford University concluded that the virus was indeed common, but so mild that the healthcare system could cope. Then a Stanford University study—and a second one from Imperial—calculated that the virus was even less deadly than seasonal flu.

Science done at speed, on rapidly changing events, is always bad science. Emerging evidence will improve it.

BUT: that evidence itself will still be speculative, questionable, maybe biased, mistaken or downright wrong.

Still, if you think the medics have little to go on, spare a thought for the economists trying to determine the full effects of the lockdown. They know even less.