Policy evaluation isn't possible without considering trade offs

This is one of those things, as with the French Revolution, where it’s too early to say:

Countries led by women fared “systematically and significantly better” in the battle against coronavirus, locking down earlier and suffering half as many deaths as those led by men, according to a new study of country-by-country responses.

The analysis of 194 countries confirms the early anecdotal observations that female leaders appeared to be doing a better job at containing the pandemic than their male counterparts, crediting the difference to “the proactive and co-ordinated policy responses” favoured by the women.

This is entirely possible, of course it is. We would make just a little point if it is, which is that if women are indeed different in their approach to political decisions then the fact that they are women has to be taken into account when voting for them. Which we do think is rather the opposite of what is the generally fashionable insistence.

However, it is the evaluation itself that needs to be considered here. As economics tells us, everything is always a trade off. As Bastiat insisted, we must consider the unseen as well as the obvious. So, what is the effect of having beaten off the virus then?

Long-term economic success or failure is still too early to be gauged.

Ah, we don’t know. So it’s too early to jump to that conclusion then, isn’t it?

This could go either way of course. Lockdown itself caused damage. But so also did the change in behaviour for fear of the virus without lockdown. It’s possible that swift and effective lockdown caused less damage than the fear would have done unchecked. It’s also possible - and we strongly suspect this to be true of the UK currently - that the lockdown has done more damage than either the virus or the fear. But the point here is that we don’t know - because it’s too early to say.

If Zhou Enlai can manage to grasp such an economic point then surely we can too?

A small observation on algorithmic marking

We’ve been told, vociferously, that the use of a central system to measure and adjust exam grades is entirely the wrong thing to be doing. Instead those with the local knowledge, the teachers, should pass on what they know to the rest of us.

The insistence upon this largely coming from those who insist that those with the local knowledge of the economy, those who participate in it, cannot be allowed to pass on what they know to the rest of us through the price system. That must be centrally directed even, possibly, by algorithm.

One wonder is why this is so, another is that none of those insisting upon both would even acknowledge, let alone understand, the observation.

Entirely missing the point

There most certainly will be changes in working habits, in society, as a result of Covid-19. Many to most of them will be changes that would have happened - like remote working - over time but will now be accelerated. All of this is obviously true.

Then we get to the error:

City centres will struggle in the short term with the effects of the pandemic, and a great number of service workers will be unemployed. This is a tragedy, but it’s also an incentive to plan for medium- and long-term solutions.

We don’t actually know what the new equilibrium is going to be. Therefore, logically, we cannot plan for it. We must instead find out what that new settlement is going to turn out to be. This requires the complete opposite of planning.

We need to free the environment from the current restrictions - we can limit ourselves to freeing the urban one if we wish - so that market experimentation can take place into what is the best manner of dealing with this brave new world. For we don’t in fact know what it is possible to do with the new technologies, nor do we know what it is that people want done out of the new range of possibilities. The best - the only useful - method we’ve got of exploring where one meets t’other is to allow all to try out whatever. The things that can both be done and meet desires will be copied and thus we find out what that new settlement is.

It is precisely and exactly at the moment that everything is changing that we do not desire to plan. Instead we have to leave it to market processes for what will be that new settlement will be emergent from voluntary interaction. We’re not trying, if we’re sensible about it, to tell the future what it must be, rather ambitious to find out what it will be.

Dear Polly - Please, do try to catch up

Polly Toynbee tells us that this world of ours is just so unequal:

Covid-19 has blown the doors off the way we live. The virus has been responsible for exposing – and increasing – levels of inequality, and that’s undeniable, politically. Families crammed into rabbit-hutch dwellings suffered proportionally many times the number of infections of those with airy gardens.

Recessions reduce inequality, they always do. It is profits that fall furthest and fastest and it is the richer among us who gain more of their income from profits. The poorest among us are hardly even in the market economy with respect to incomes, gaining such from benefits - there is no problem with this, it is simply an observation - and those don’t fall in a recession. Income inequality therefore reduces in a recession.

As to small dwellings, we agree. We have been shouting about how Britain builds the smallest new housing in Europe for decades now. The necessary solution being to blow up the planning system, that one that insists upon over 30 dwellings per hectare of land. You know, that reform that is happening and which you so oppose.

As the pages in which Polly writes point out, comment is free but facts are sacred. Perhaps a little more attention to the latter could be of use over there?

Don’t Blame Public Health England

There’s nothing like a good old testament scapegoat for placating public opinion but that is not necessarily fair to the goat.  Right at the start of the pandemic, Matt Hancock should have known the poor bewildered beast he had tethered in his back yard. Public Health England (PHE) has staff numbering 5,500, 43% being scientists, and last year cost £287M (net).    

As an executive agency of the Department of Health and Social Care (DHSC), it is duty bound to publish annually its performance versus pre-set targets. The last annual plan has a long list of achievements but no overall performance metrics, nor targets nor explanation of how PHE achieved those targets.

“Keeping the Public Safe” is the top priority and five achievements were reported under that heading. Disease outbreaks are, and were, dealt with by the NHS; and the extent to which the world should be PHE’s oyster is open to question.  The only protection for the UK public was the delivery of the routine annual flu vaccine and there is no mention of how efficacious that was versus prior years. 

The analysis of expenditure is revealing. £87M of the expenditure (30%, 2,093 staff) went on “National centres, regional network and capability to identify infectious disease, surveillance and management of outbreaks”.  That is pretty much all bureaucracy since, as noted above, since the NHS that dealt with these outbreaks. The next largest, £73M (25%, 1,027 staff) went on “Supporting local government, clinical commissioning groups and the local NHS”. One suspects the local medical staff could have made better use of the cash. 

£65M (644 staff) was spent on admin and £32M (79 staff) on “Helping people to take control of their own health”.  I am sure we all feel better for that. The most exciting development is the new 40 acre site in Harlow to which PHE plans to move most of the scientists and half of the staff in total. Few people would recognise Harlow New Town as a world science centre.  The Gilbey’s Gin distillery was the closest Harlow has ever previously been to science. Co-locating most of its staff near London makes sense but 40 acres seems excessive.  

It also symbolises PHE’s empire building but inward-looking orientation which was probably the largest single reason for its failure to deal with the Covid pandemic. Whereas Germany involved its national industrial base in testing and PPE supply, PHE refused to delegate and ignored offers of help.  The blame game is now well underway.  The Times (17th August) reports: “Duncan Selbie, the organisation’s chief executive, said: ‘This criticism of PHE’s response to testing is based on a misunderstanding about our role.” Well, of course, strategy may not have been but preparedness certainly was and so was organising mass testing. The response is typically narrow. 

The last PHE annual report uses the word “pandemic” 10 times but it is not until p.110 (of 168) that we reach any substantial mention: “Pandemic influenza continues to be one of the top risks in the National Risk Register of Civil Emergencies. We continue to maintain an appropriate stockpile of antivirals for pandemic flu preparedness in line with DHSC policy for continuing to be prepared for a more severe influenza pandemic. Future stockpile decisions, will, as they have done in the past, take account of the latest scientific evidence and international comparisons. Any future changes in pandemic flu policy and the impact on stockpiles will be agreed through the governance arrangements in place with DHSC.” 

In other words, they are justifying getting rid of their PPE stockpile and if the UK is struck by any pandemic other than good old-fashioned influenza, PHE will not be to blame. 

PHE should not be priding itself on having world-beating scientists even if they are.  Governments are supposed to govern, not play with test tubes.  Certainly government should commission the research we need but not do it themselves.  Take that away and the second guessing of the NHS (£73M), the admin (£65M) and telling us to take more exercise (£32M) and there is not enough left to make an executive agency. The case for terminating it was made two years ago. His department has plenty of people to do the key tasks that should be retained, namely planning for future emergencies and ensuring that the relevant resources will be available, health strategy and directing campaigns.  We are talking of 100 people, not the 3,000 non-scientists in PHE.   Saying goodbye would not bring a tear to the eye. 

Sadly, Matt Hancock has a worse plan: reshuffling the cards with NHS Improvement, another redundant quango, but keeping them all in play with a little rebadging to look like progress. The Secretary of State has his public scapegoat but is only pretending to butcher it. Plus ça change.  

We entirely and wholly support Selfridges' policy change

We do this not as a commercial endorsement you understand - we suspect that any such from us would have little value anyway - but to make the important policy point that it is revealed preferences that matter, not expressed.

Selfridges must embrace changes in shopping habits that have pushed ethical and environmental concerns to the front of the queue, according to the department store’s boss.

The upmarket store group, which recently cut 450 jobs after a tough year, is introducing clothing rental, a second-hand fashion shop, beauty pack recycling and a “concierge” to help organise product repairs as part of a five-year sustainability plan intended to adapt to new ways of living.

“I think the pandemic has changed everybody’s thinking forever,” said Anne Pitcher managing director of Selfridges as she launched the department store’s Project Earth five-year sustainability plan.

We hear much about how consumer tastes have changed. Which may well be true and if they have then we hope, fervently, that they are met. We are less happy with the insistence that since consumer tastes are claimed to have changed therefore every retailer, perhaps the entire economy, must be changed. For that second smacks more than a little of projection of their own views, by those who hold those views, upon everyone.

Now that Selfridges is offering these claimed to be desired things we can find out whether they are actually so desired and in what quantity, with what fervour. If they’re a profitable success then others will no doubt copy them and there will be no need for legal or regulatory insistences. If they’re not then we’ll have tried it and found out that this isn’t in fact what some sufficient number of people desire.

All of which shows that great glory of a market based economic system. By offering alternatives to suit every taste we find out what it is that people actually do want rather than what current fashion has them parroting what they think they should want. That is, a market system insists upon people walking the walk rather than merely talking.

“This is now available, how many want it?” is the great testing method of that market economy. There’s also no other manner of finding out what it is that people really do desire.

The impossibility of a planned economy

We have the advice of Hayek, that the centre can never have sufficient information, in anything like real time, to be able to manage let alone plan an economy. But we also have a more empirical proof from Phillip Inman at The Observer:

Britain isn’t ‘recovering’, whatever the Bank may suggest

Phillip Inman

Threadneedle Street’s forecasting has been faulty. But it must still play its central role in protecting jobs and the economy

The insistence is that those who we employ to do that management, that planning, for us are deluded as to the reality they are supposed to be managing, planning. Which does, of course, mean that they’re not going to do the managing, or planning, very well.

We seem to have hit one of Sir Pterry’s imp arses in our attempts to manage, or plan, the economy therefore.

It’s difficult to see what to do about this as well. The secondary claim here is that there are those who do know, who have the knowledge and the foresight to undertake such management on our behalf. But how do we pull those enlightened from their more important, better paid and more raucously enjoyable, current employment of scribbling for the Sundays into the bureaucracy? Do we have to shame them into sacrificing on our behalf? Conscript them, what?

Until we solve the problem of how to get those who really do know how to do it into the job of doing it we cannot have a managed, or planned, economy, can we?

Much of what has been spent fighting climate change has been wasted

As we’ve pointed out before if solar power really does become cheaper than fossil fuel powered electricity then we’ll all quite naturally switch and climate change will be dealt with. there is, after all, plenty of insolation out there to power an industrial society. Yes, problems with intermittency and all that but it’s all manageable if there’s enough cheap electricity to start with.

This being a point that Bjorn Lomborg was making 20 years ago of course. Solar then had been declining by 20% a year in price for some decades. That price reduction has continued these past two decades. It looks like it will continue again:

An Oxford-based solar technology firm hopes by the end of the year to begin manufacturing the world’s most efficient solar panels, and become the first to sell them to the public within the next year.

Oxford PV claims that the next-generation solar panels will be able to generate almost a third more electricity than traditional silicon-based solar panels by coating the panels with a thin layer of a crystal material called perovskite.

Start by agreeing to believe, for the same of argument, the climate change claims. There’s a problem, we’re causing it, something must be done and that something is non-fossil fuel energy generation. OK.

So, what do we want to do? Enforce the installation, at significant scale, of technologies we know are inefficient and expensive compared to next year’s? Oh, and make ourselves and everyone else poorer at the same time through having to pay the subsidies. Or rather wait until the effective and efficient technology is available and then gawp in wonder as everyone voluntarily installs it?

To frame the question that way - correctly - is to show that all that money spent on expanding solar installations, rather than research, has been wasted so far. But then some of us have been saying this for some time now.

Just a little point about the US social safety net and welfare state

It is commonly assumed and often stated that the United States has a very much smaller social safety net than most other countries. This is not actually so. It is also said that the US has a smaller welfare state and this is also not quite so.

As Timothy Taylor reminds us here:

Second, America is commonly perceived to spend much less on social welfare than many European countries. This perception arises because most comparisons focus on gross public social welfare spending. In fact, after taking into account taxation, public mandates, and private spending, the United States in the late twentieth century spent a higher share on combined private and net public social welfare relative to GDP than did most advanced economies. Americans just did it differently because the governments operated a safety net system that relied to a much greater extent on private insurance and pensions and taxed lower income people less heavily.

This ties into the manner in which the US Federal taxation system is much more progressive than that in most other countries. For it near entirely depends upon the progressive income tax and does not even contain that possibly regressive VAT.

The truth being that the US has a social safety net as do all other rich countries. It’s just that they do it differently. Much more private provision, much more of the government provision being in-kind and through the tax system and through taxing the poorer rather less to start with.

It’s possible to argue that this is a better or a worse way of doing it. But the usual assumption that it isn’t being done just isn’t true.

The more you like government the more you want a V shaped recovery

A little bit of plain mathematics for those who think we should both have more government and also a smaller economy. Less of that horrible consumerism that so blights the environment and so on. There’s a mathematical problem with this.

To estimate numbers a bit - they’re close enough to reality to illustrate the point.

Before, in February, UK GDP was about £2 trillion a year and the tax take of that was some 35%. Now, with the GDP plunge, it is some £1.6 trillion a year. If the tax take remains at 35% then that means significant real term cuts in everything government does.

Alternatively, to keep the amount of government we have the tax take needs to rise to about 44% - rather more than we’ve managed to raise in modern Britain.

Further, note what happens if we increase the government portion of the economy from around the OECD average to high up in the distribution. We don’t gain any extra government at all. We only get to pay for the amount we already have.

The only way out of this is that the economy grows again.

Thus, the more that you desire more government programs to do such lovely things then the more you have to be arguing for swift economic growth from where we are now.

Our view is, of course, that as we gain that lovely economic growth then there are fewer problems that government need spend money upon. But that doesn’t change the simple maths above.