There's nothing quite so conservative as a lefty

The Guardian treats us to a long read from an Adrian Daub on the subject of that Silicon Valley buzzword, disruption. The attempt is to discuss capitalism, creative disruption and how this all works. The attempt working about as well as we might expect given the source:

Adrian Daub is a professor of comparative literature and German studies at Stanford University, and director of the Michelle R Clayman Institute for Gender Studies

Yes, well. It’s not impossible for that academic background and those specialties to provide insights into the economy but we’d not say that it’s obviously a good starting point. There are some good quotes from Schumpeter and so on but the underlying argument has a fatal flaw in it.

For that argument complains about capitalism undermining the settled order and so on. Which isn’t the point at issue at all. Free market capitalism is a good way of gaining the thing which undermines the settled order, that’s true, but it is not the thing itself. The thing itself being technological change.

Unless, and until, we realise that these other things - capitalism, markets, creative destruction, disruption - are proxies for that technological change, or possibly methods of gaining it, we’re not going to get to the heart of the matter under discussion. If we desire technological stasis then yes, abolishing free market capitalism is a great way of preventing the creative destruction and disruption, by banning the system that best encourages that technological change.

But who actually desires that? Well, William Buckley told us:

A conservative is someone who stands athwart history, yelling Stop, at a time when no one is inclined to do so, or to have much patience with those who so urge it.

Again, the tag, the name, we generally put upon it is just the proxy. The argument against disruption is one in favour of technological stasis. The argument against that free market capitalism, because creative destruction, is the intensely conservative one that technological change should not happen, we should cease to use the best manner of gaining it. Which isn’t a very good economic nor social argument, is it?

Power to the People

The National Grid looks likely to come under increasing strain due to the conflicting government policies on nuclear, renewables, zero carbon and funding.  As fossil fuels are phased out, and electricity becomes our only source of power, its sufficiency should be the top priority for the Department for Business, Energy and Industrial Strategy (BEIS). Yet the UK commissions nuclear power plants like Cheshire Cats: Anglesey Wylfa, Moorside and Oldbury have all been cancelled.  Nuclear running costs are competitive with fossil fuels but the capital costs and development time, both exacerbated by overruns (and tendered to an oligopoly), e.g. Hinkley Point C, are not. 

In a net zero scenario, the continuing use of fossil fuels for electricity generation is only really possible with carbon capture usage and storage (CCUS) which is mainly done by scrubbing the CO2 out of the coal and gas fired power station emissions and then storing it (usually by injecting it back into the layers of rock that had held oil or gas or into old salt mines). “Around 98 percent of the injected CO2 remains permanently trapped in the sub-surface.”

There are over 40 CCUS plants around the world but none in the UK. Nearly two years ago BEIS announced (28 November 2018) the UK would become “a global leader in CCUS” by following this “Action Plan”: “Commissioning of the first CCUS facility from the mid-2020s would help the UK to meet our ambition of having the option to deploy CCUS at scale during the 2030s, subject to costs coming down sufficiently.”

Despite the progress made in energy production in the last century, fossil fuels (handicapped by sometime CCUS), renewables and nuclear will not be enough: we need new sources.  

BEIS, in its published “Areas of Research Interest 2019 to 2020” mentioned the word “electricity” only eight times in 49 pages. They mostly concern storage, e.g. 16 references to hydrogen. but none have to do with generating the stuff. 

My favourite BEIS hydrogen “research interests” are “What are the costs and barriers to producing and storing large volumes of low-carbon and zero-carbon hydrogen?” (p.33) and “What is the fate of hydrogen in the environment, and its effect on climate and the ozone layer?” (p.36). Of course, hydrogen was the first element in the universe and will probably be the last. We do not need to worry about its fate. And I am pretty sure hydrogen does not contain any carbon. Has anyone in BEIS got a GCSE in chemistry? 

The document acknowledges “BEIS has committed to achieving net zero greenhouse gas emissions and ending our contribution to global warming by 2050” but, extraordinarily, gives no estimate of what the demand for green electricity will then be nor how that demand will be met. The latest BEIS “Updated Energy and Emissions Projections 2018” only gives projections to 2035 by source (coal, gas, imported, oil, renewables) but not in total. 

The much vaunted hydrogen can be produced by burning gas (termed “blue”) or splitting H2O molecules by electrolysis (termed “green”). Both are hugely expensive and inefficient because they need more energy to produce the hydrogen than it delivers, i.e. it is a net negative in electricity generation terms. Blue hydrogen would require a massive increase in oil imports, which is why Shell and BP are lobbying for it, and CCUS plants. Electrolysis is not mentioned at all in the BEIS Areas of Research Interest. 

If the UK were to have a major surfeit of electricity generation, hydrogen could be helpful as a non-pollutant fuel for motor vehicles, and therefore an alternative to electricity, and as a way of, in effect, storing electricity. BEIS projects only as far as 2035 but, by then, there will be a continuing deficit of about one quarter, i.e. net imports. In a letter to The Times (24th September 2020), Cambridge’s Professor Cebon concludes “There seems to be no way to reconcile the prime minister’s enthusiasm for hydrogen, except to conclude that he and his advisers have been misled by the fossil fuel lobby.”

Clearly we need new technology and fast. Generating electricity from methane is no more than a gleam in scientists’ eyes. BEIS does not seem to be paying enough attention to molten salt reactors. They were successfully tested in the late 1960s and yet were not even mentioned in the BEIS Areas of Research Interest. They would make electricity cheaper than gas-powered generation. As they operate at low pressures with the risk of explosive dispersal of radioactive material eliminated, they are safer and produce less radioactivity per kWh. Small modular reactors can be factory-built and delivered by road. Because of their size, simple design and low pressure, full regulatory approval should not be a major issue, with construction possible less than four years later.

Ensuring electricity adequacy is the most important role of BEIS and especially as we move toward zero-carbon.  It is irresponsible to commit to zero carbon 2050 without, it would appear, estimating the then demand for green electricity nor how it will be sourced.  The government needs to think more clearly how UK electricity supplies should be secured. 

We don't think the definition of recession works this way

The Guardian tells us that there’s an interesting definition of not being in recession:

Britain’s economy entered the deepest recession since records began after shrinking by more than in any other major nation in the second quarter. GDP fell by 20.4% after a decline of 2.2% in the first quarter. Economists consider two consecutive quarters of shrinking GDP as the technical definition of a recession.

Growth rapidly recovered after the lifting of lockdown restrictions over the summer, helped in August by the government’s “eat out to help out” restaurant discount scheme, putting the UK on track for the fastest growth in the G7 in the three months to September.

However, analysts said the recovery would probably stop as restrictions are reintroduced and infections climb, ensuring that the country remains in recession until at least next year. Two quarters of positive growth are required to confirm a technical exit from recession.

The deepest recession among others part we’ve already dealt with. ONS has, uniquely among statistical agencies, included the loss of output from the government health care and education systems.

However, it’s that two quarters of positive growth required to not be in recession that we think to be wrong. That’s certainly not the definition that was used in the recent past when there were worries, 5 and 10 years ago, about double dip recessions and all that. One quarter of positive growth was all that was deemed necessary for us not to be in recession.

There is also the point that if we accept this two quarter definition then every recession must last at least a year - two quarters of negative growth to be one, then another two quarters of positive growth before we can declare we’re out of it. And no, recessions are not all of 12 month minimum length.

Finally, there is the point that if this is true then the recession is going to last until next year anyway. The second quarter had negative growth, like the first, and under this two quarter definition whatever happens to growth in the third and fourth we’d still be in recession at the beginning of next year. That is, if it is the true definition then what The Guardian is telling is not news it’s simply a logical certainty.

Finally, finally, there’s the point that we generally regard this whole thing as being binary - most unfashionable though that is concerning social matters these days. We are either in recession or not. If our definition of recession is declining growth for two quarters in a row - which it is - then one quarter of positive growth must be non-recession. For it isn’t meeting that definition of two of negative. We also don’t have the third word, the third state, somewhere inbetween recession and not-recession.

We really do think this definition of recession being used is incorrect.

A ban always does mean people want the thing being banned

A ban on the taking of narcotics does, quite obviously, mean that those proposing the ban think some would like to take narcotics. A ban on booze sales after midnight equally means those banning think that in the absence of the ban booze sales after midnight would take place as part of voluntary interactions.

It is with this in mind that we can evaluate the ban on petrol or diesel cars by 2030. The government is insisting that the electric, hydrogen, whatever, cars on offer by then will be worse:

The UK is poised to bring forward its ban on new fossil fuel vehicles from 2040 to 2030 to help speed up the rollout of electric vehicles across British roads.

Boris Johnson is expected to accelerate the shift to electric vehicles this autumn with the announcement, one of a string of new clean energy policies to help trigger a green economic recovery from the coronavirus pandemic.

If these new technologies are going to be better - in price, comfort, range, general utility, whatever - then we do not need to be banned from buying the alternative. Because no one will voluntarily buy said worse alternative, that’s not how we humans work.

This is all akin to the point we’ve been making for a couple of decades now about solar and other non-fossil energy sources. Once - if - they are actually cheaper then no planning, subsidy, taxation or regulation is required. Everyone will entirely naturally move to the cheaper energy source.

This point also working in reverse, as with the cars. The very insistence upon a ban, upon regulation or punitive taxation, is all the proof required to show that those proposing the ban - regulation, punitive taxation - themselves insist that the new alternative is worse.

That the government is thinking of banning the sale of new internal combustion engines by 2030 is all the proof we need that the electric, hydrogen, alternatives are still going to be terrible by then.

Oxfam demands that we all get much poorer right now

Oxfam has given us an interesting little lesson in how an assumption drives the conclusion here. They’re telling us that richer people have higher carbon emissions than poorer people. This is terribly naughty of us all. And it is all likely to read this too. The top 10% of the world is, as they say, those earning more than $35,000 a year. Everyone on more than median UK income that is, roughly enough. Their solution is that everyone at this giddy height of plutocratic luxury must have less - that we all should become much poorer.

This is indeed what they say:

The richest 10% of the global population, comprising about 630 million people, were responsible for about 52% of global emissions over the 25-year period, the study showed.

Globally, the richest 10% are those with incomes above about $35,000 (£27,000) a year, and the richest 1% are people earning more than about $100,000.

That’s all of us in that 10%.

The report is here and it’s necessary to get to footnote 25 to find the calculations of all this, which are here. The only important line of which is:

Our starting point is the assumption that household income drives household consumption, which in turn drives the level of household consumption emissions.

The starting assumption is that higher income people have higher emissions. The finding is that higher income people have higher emissions.

Our word, that is a surprise, isn’t it? So too are we terribly surprised at Oxfam’s policy insistence that follows, which is that all those naughty rich people must have less. Presumably everyone who works at Oxfam is going to take a pay cut to under $35,000 a year. For do note that given their starting assumption trying to live a greener lifestyle, walking not driving, recycling everything, giving up meat to live on grass, none of this aids or helps in any manner. Because the assumption has been made that income and income alone determines emissions. Thus income must be lowered, not lifestyles changed. That starting assumption also means that piling up the bird choppers and the solar cells makes no difference - income is all. Shriving ourselves is the only solution, a finding entirely driven by that starting assumption.

Our verdict is that Oxfam must do better. The logical fallacy of begging the question was identified by Aristotle as τὸ ἐξ ἀρχῆς (or sometimes ἐν ἀρχῇ) αἰτεῖν and he died in 322 BC. We don’t think it’s too much to ask for that people make new mistakes, is it?

It's such fun watching a myth being created

Fun to watch the attempt, as long as none of us succumb. As Will Hutton states:

The first issue would surely have been the need to build a resilient public health system capable of handling pandemics effectively; it is the precondition for all economic and social life.

Local and city government simply has to be more empowered to act, with systematic access to data, on the German model; and, like Germany, the diagnostic capacity has to be built within the public sector rather than run by an uncoordinated jumble of private subcontractors, often party donors.

This being myth creation rather than a description of reality. Well, it’s Will Hutton, so it will be. In the US the testing problem was that the CDC insisted upon creating its own test, then banning anyone from using any other - despite their managing to infect their own test kits with Covid-19. A little later the FDA even banned the taking of swabs via home testing kits.

Here in the UK PHE tried something very similar. There must be that central control by the bureaucracy. Germany, on the other hand, went entirely in the other direction. Private companies - here the description is of one that normally does colon cancer tests - fiddled around and tried to see what worked in testing. Some 300 labs, private, public, university and charity, jumped in to multiply the capacity of what was proven to work. This is not a description of a centrally controlled testing system - Bosch is not generally known as a public sector enterprise.. This is a description of market processes. Wild experimentation by whomever followed by the adoption more generally of what is proven to work.

Will Hutton is insistent that a world run by people like Will Hutton will be a better world. We’ll agree it would be a better one for people like Will Hutton but balk at the idea that it would be better for anyone else. This example of pandemic testing systems being just that, an example of our argument.

Because what works out there in the real world is exactly the opposite of what Hutton recommends. Decentralisation and markets are the correct response to uncertainty, not centralised bureaucracies. And we shouldn’t allow the myth to be created that the German system - the one that worked - was anything other than that decentralisation and markets.

A bad - and important - missing of the point

We ourselves have a certain nostalgia for flying, especially those days of yore and unlimited free gin even in cattle class. We are perhaps less enamoured of today’s bus in the sky manner of travel. But the important point to grasp here is that those are our preferences, not those of others:

Environmental campaigners have condemned the rise of scenic “joy flights” aimed at passengers “missing the excitement of travel”.

This is to miss the entire point of the whole economic exercise.

Anna Hughes, director of sister campaign Flight Free UK, said “I understand why they are doing it – but it really is insanity – a flight to nowhere is simply emissions for the sake of it. If that’s the society we’ve built, where we’re that addicted to flying, then we have a serious problem.”

The serious problem is with Ms. Hughes and her understanding.

That economic game, the very idea of having a civilisation in fact, is to increase the ability of each individual to maximise their utility. Utility meaning whatever it is that increases the very joy at being alive in this brave new dawn. The only person determining that utility being the person experiencing the increase in it.

If people desire flights to nowhere then good luck to them. That’s actually the point of the entire structure, that people gain more of what they desire. This is true even if there are limitations - as there always are. If the limitation is CO2 emissions and the most valuable - utility increasing that is - deployment of whatever allowance can be had is a joy flight then so be it. It won’t be for most to many people and will be for some. The world is made both richer and more liberal by people being able to increase their own utility in the manner that they themselves define.

Or, to put it more pithily, that you don’t like joy flights doesn’t give you a veto on others taking them.

Cornish lithium

Apparently Cornwall is floating on a pond of lithium containing brine. We have no view at all on whether this is a commercially viable prospect. This is not a share tipping column. The presence of lithium does not surprise at all though. There is, for example, a similar finding from the geologically very similar Ore Mountains on the German/Czech border.

The point we do want to make is that this is just another example of how we’re not about to run short of any metal or mineral we might find economically useful. As we laid out in the No Breakfast Fallacy some years ago.

When people start talking of mineral reserves and how they’re going to run out real soon now they misunderstand what a mineral reserve is. The best colloquial description being the stocks of minerals we’ve prepared to use real soon now. Such listings of reserves - the usual agreed source being the US Geological Survey - are not, not in any manner, shape or form, the calculation of what is left that can be used. Therefore all those alarmed stories and alarming shouts that we’re about to run out are wrong. Wrong because people simply are not understanding the terms of art in use in this field.

Mineral reserves are what we’ve proven we can extract, proven at substantial cost, and make a profit from. Mineral resources, a much larger number, are what we’re really very certain we can but have not proven as yet. The real limitation on usage is what’s out there in the other 99.9% of the world that we’ve not had a good look at yet. A useful even if sketchy estimate of lithium availability says we’ve got about 70 million year’s worth out there before we have to worry too much about actually running out. Which will be, we think, enough to be getting on with. Whatever happens in Cornwall.

This command of other peoples' stuff is very popular, isn't it?

As we noted yesterday there’s a certain fashion for assuming that other peoples’ property isn’t in fact other peoples’.

Effectively commercialising innovation and then defending it from being snapped up by overseas rivals are vital too.

For overseas to have any useful meaning here it would be necessary for the innovation, or the organisation, to be owned by the country. Which isn’t what is being talked about at all. Rather, the results of innovation having been done and being owned by people who happen to be residents or citizens of the country. And that insistence that they may not sell them as they wish is an insistence that it doesn’t belong to them but to the country.

From Arm to Deep Mind, the AI firm acquired by Google, and Imagination Technologies, the chip group acquired by China’s Canyon Bridge, there is a long list of cutting edge UK technology companies which have been taken over before they have had the chance to emerge as national champions.

What is this national champion shtick? They’re private companies in a capitalist system. They’re owned by the people who own them who may, therefore, dispose of them as they wish. They can, a necessary condition of the system itself, leave them to the cats home, to medical charity (as with Wellcome), keep them, float them on the stock market or sell them to Johnny Foreigner. That’s what private property means.

Again, it’s hard to know how much of this may be cultural. Are UK entrepreneurs happier to sell out and enjoy the fruits of their labours at an earlier stage than their hungrier and more red-blooded peers in Silicon Valley?

And if this is so? Apart from proof that British entrepreneurs are well rounded individuals who realise that money isn’t everything that is.

UK must refuse to sanction sales of tech stars

This is the declaration that your property is not your property, Comrade. Or perhaps closer to that other collective aberration, fascism, where the role of business is to be at the behest of the State.

We really do need to remember that lesson of the 20th century. We did get that natural experiment in collective and personal ownership of productive assets. And, in the words of PJ O’Rourke, “The privileges of liberty and the sanctity of the individual went out and whipped butt.”

Why would we want to reimpose a system we’ve just spent a century proving doesn’t work?

PHISAG wants to hear from you

As Matt Hancock has been too busy even to think about the date for the Social Care Green Paper (Q182), you may be wondering how he has been spending his time.  The answer is establishing the "Population Health Improvement Stakeholder Advisory Group" (PHISAG) which will be ready to roll and wanting to receive your advice next month. This will be part of Lady Dido Harding's new empire: the National Institute for Health Protection (NIHP), You may remember her as the person bringing us the world beating Test and Trace system by 1st June. Her career may not have yielded much health experience but it has not been without controversy.  Fortunately, she will be supported by another interim appointment: Michael Brodie, who was previously Director of Finance for Public Health England (PHE), will be CEO for the time being. 

The NIHP rebadges PHE. You might be wondering why because, according to Matt Hancock, PHE “has a superb professional and scientific base, on combating infectious disease, other health hazards and other risks to health such as obesity. PHE’s dedicated and highly skilled workforce has an excellent track record in dealing with health protection incidents both large and small.” Apparently, PHE was just not big enough. If you are so ill-informed as to consider PHE to have been useless, expect NIHP to be twice as useless. Officially, NIHP will have “a razor-sharp focus on COVID-19 and the challenges posed by domestic and global threats to health.” 

As the NIHP’s responsibilities are too many to enumerate, Hancock had to restrict himself to listing 13, three of which will be “global health security capability”, “UK-wide” and local. The second of those may surprise Edinburgh, Cardiff and Belfast who think that health is devolved and the third may surprise the councils who think their public health directors report to them.  It will also take over the management of the “NHS and local government...to support a greater focus on prevention in the delivery of local health services, and to improve integration so that people receive the joined-up care and support they need.” 

As nothing can be done without a couple of new quangos, there will be a “Transition Team” reporting to a “Transition Board” which “will purposely [sic] look at the global best practice on pandemic preparedness and health protection systems and agencies to inform organisational design.” Remarkably, global best practice can be identified in time for PHISAG publicly to report options within six weeks and it will all be sorted by the end of this year. They should tell their Green Paper colleagues how to do that. 

Perhaps PHISAG is an unfortunate acronym as some may assume a reference to sagging bellies, when the opposite is the intention. Health protection is better and cheaper than cure; thanks to the NIHP we will all be trimmer, free of alcohol, smoking, sugar, salt, fat and unhealthy practices that should not be mentioned.  

The cost of all this?  No one has a clue but we should understand that the NIHP will make us all so fit and well that HM Treasury will be able to save pretty much all the costs of the NHS. Will Rogers summed it all up: “It's easy being a humorist when you've got the whole government working for you.”