Hayek was right about the National Health Service

No, not that we’d all become slaves the moment that the NHS tottered into action. Not that he said that anyway - rather, that once health care was politically delivered then health itself was going to become a political matter.

George Monbiot complaining about this in his column:

A recent study shows that diseases mostly afflicting women tend to receive less funding than those mostly affecting men. Scientific effort is also, to a large extent, a function of the effectiveness of patients’ campaigns.

When medical care is run by the political system then of course politics will determine what is treated and how. When medical research is allocated by politics then political power will determine what gets researched.

The problems with Monbiot’s complaint is that this is the world that those on the left desire. That all of these things be allocated by the political system. Therefore, of course, it is going to be political power - threats to vote or not vote, campaigns to whip up the populace, the clamour of public politics that is - which will determine investigation.

Why, that is, is the complaint about the world they themselves have created? Or even, how dare they complain about political allocation when they campaign for political allocation?

Unilever's mistake about the supply chain

This is worse than a mistake, it’s an error:

Millions of people around the world are in line for a pay rise after Unilever pledged that every worker in its supply chain will earn the living wage by 2030.

One of the canonical works of popular economics is I Pencil. An inverted reading of which is that the supply chain of something - of anything at all - is the global economy.

As it’s not possible to ensure that everyone in the global economy is paid a particular wage the effort is doomed from the start.

The consumer goods giant said it will require its direct suppliers to pay staff a local living wage that allows “workers to participate fully in their communities and help break the cycle of poverty”.

That may be how it starts, to that first level of the supply chain. But that’s not where the demand is going to end - we’ve seen that with boohoo and Leicester. The fashion chain has been critiqued because companies three and five levels down that supply chain might, possibly, have been employing the undocumented on less than the national minimum wage.

The underlying misunderstanding is the old one about the planning of an economy. That from some point we can determine what happens though out the complexity and near chaos of a global economy. Here it’s the payment of a certain income but the same desire has been applied, at times, to output prices, volume and detail of output and so on. All such attempts fail for the same simple reason,.

It’s simply not possible to know, to the required level of detail, what the supply chain is. Because it is all those 7 billion people out there and their interactions. This is not something controllable therefore attempts to control it will fail.

It’s simply not going to work.

Zambia buys a copper mine - the most lively experiment is about to happen

Zambia is buying the Mopani copper mine from Glencore. Glencore is lending the bankrupt - well, it’s in default, anyway - country the money to buy the mine. This is going to be a fascinating experiment.

We can’t help but think that the timing’s a little wrong. Zambia sold the mine, or at least Glencore took it over, back in 2000, when the copper price was 65 cents per lb US. Today it’s $3.50. Selling at the bottom and buying at the top doesn’t look that great a deal for Zambia it has to be said.

So, why do this? Well, it’s as we pointed out back here. Various of the NGOs have been really insisting, really most insistent, that Zambia is being ripped off by the price it gets for its copper. There was all that nonsense from Alex Cobham when he was at CGD about how prices varied by hundreds of percent from what they ought to be. Gobbledegook as it turned out.

But the underlying insistence still burns bright in many. The poor country is ripped off by the ugly foreign capitalists.

But now we’ll see, won’t we? Will the mine be better managed? Will the price received for the copper improve? Will Zambia actually gain from not being exploited by the Big Bad Capitalists?

Our point here being a simple one. The experiment to work this out is now being undertaken. We will in fact find out, in a few years, whether the rip off was happening or not. And the evidence will be simple too - is Zambia going to gain from not having Glencore owning the mine and thus controlling - recall the claim - both the export price and the import one?

Ourselves we think it’s going to go horribly wrong because there was a reason that Zambia privatised those mines at the bottom of the market. They couldn’t make any money running them directly. But leave that aside. Here we’ve now got a direct test of those claims of exploitation. Let’s not take our eye off this ball until we see the results.

You know, hold the NGO types to the proof of their claims.

Reasons for optimism - autonomous vehicles

One of the technological developments that will transform the British, and much of the world’s, economy is the emergence of autonomous (self-driving) vehicles. It will make a huge and positive change in the way in which people and goods are transported by land, sea and air. It will be a positive development because it will be faster, safer and cheaper.

The artificial intelligence that controls autonomous vehicles will not make the driver errors that are the major cause of road traffic deaths, currently about 1,750 per year in the UK, or the roughly 25,000 serious injuries sustained annually. Communication with other autonomous vehicles, will enable much of the current traffic congestion to be avoided. Journeys will be faster as well as safer.

Marine transport will be similarly autonomous, with fewer crew needed, and the enhanced ability of ships to avoid collisions with other ships or with rocks and reefs. Higher speeds and shorter transit times will be possible, speeding up the flow of trade and lowering its costs.

The automation of passenger and freight transport on roads will lower costs because machines are less costly to operate than people. There will be dislocation as the jobs dwindle for truck and bus drivers, for chauffeurs and cab drivers, just as the advent of railways and automobiles cut the jobs for coach drivers, postilions, grooms, stable boys and blacksmiths. But the economic growth spurred on by the change will itself create the new jobs to replace them. Increased productivity means more output per worker, and autonomous vehicles will make those still involved in transportation much more productive, lowering costs and increasing economic growth.

There will be autonomous air transport, in addition, involving people-carrying drones as well as the automation of more conventional aircraft. In all of these cases there will be convenience and new capability added to the safety, the speed and the reduced costs. The ability to have passengers and goods lifted directly from tall buildings will dramatically cut congestion and travel times. Artificial Intelligence can handle the traffic in three dimensions in a way that would be difficult, if not impossible, for human operators.

These developments will amount to an economic revolution, but it will be a positive one, just as electricity was, because of the opportunities they bring. Commentators who predict a future of stagnation and falling living standards are failing to account for the economic impact that technological innovations can bring. The impact of autonomous vehicles is set to be both transformative and positive.

Abolish stamp duty - transactions taxes are bad taxes

A certain head of steam is building up behind a good idea. The current alleviation of stamp duty on housing transactions should not just be extended, the tax itself should be abolished:

Better still would be to scrap the damn thing altogether, for the reasons above.

Or Tom Clougherty, formerly of this parish:

But there’s a bigger picture here, too. Stamp duty is without question the worst tax on the UK statute books, wreaking havoc on Britain’s already troubled housing market and imposing an unacceptable drag on welfare and productivity. Research suggests that its wider social and economic costs are equivalent to some three-quarters of the revenue raised – making stamp duty many times more damaging than income tax or VAT. Put simply, it’s just a bad way for any government to raise money.

Why is that? Well, by raising transaction costs, stamp duty makes buying or selling a property less appealing.

Or, as Tom quotes, a Nobel Laureate on the point:

There is no sound case for maintaining stamp duty and we believe it should be abolished.

We do actually know that it increases unemployment, just as one example. Making the housing market less liquid makes the labour market so, this being something that does increase unemployment.

Then there is the more general case made by Sir James Mirrlees, that NL mentioned above. Transactions taxes are a bad idea. Taxing land values, of consumption, or incomes, or even in extremis capital, all make more sense than transactions. For the deadweights, the losses from the existence of the tax, are all less with those other forms of taxation.

It’s also possible, obviously, for government to spray less of our money around but even without that a change in the tax system to one without stamp duty would be beneficial.

On the one off nature of a wealth tax

Jamie Hambro is sceptical of the insistence that a wealth tax will be a one off imposition:

I have some difficulty with thinking of a wealth tax as a one-off if it is repeated for five consecutive years. And I doubt it will end after five years. Income tax was introduced in 1799 as a one-off tax to help pay the costs of the Napoleonic Wars (this after a wealth tax on houses, horses and carriages and servants and another new tax – inheritance tax – failed to raise enough).

That seems a fair surmise to us. The standard economics of taxation tells us that wealth taxes are a bad idea. The little get out available being that a one off wealth tax, unannounced and impossible to dodge, isn’t so bad. But that isn’t so bad bit rests, entirely and wholly, on the one off nature of it. Which is why those who would tax wealth are telling us it will be a one off, so that it can be introduced and then made more permanent.

Yes, we can come across as a little cynical about the political process at times. But then we’ve got good reason to be. From one of the Advani and Summers papers about this wealth tax:

We do not include a measure of the expected individual value for future public pension payments. Clearly there is a relationship between the existence of public sector pensions and household saving decisions (Lachowska and Myck, 2018) but there is no contractual obligation for the government to maintain future pension payments at levels currently expected. In which case, a consistent alternative to our approach would be to include the effective value of an individual’s entitlement to the entire existing social security system.

We don’t include any part of the welfare state - not even the state pension - in our estimations of wealth because without a sound contractual relationship we can’t trust the government to actually pay such things.

But we can and must trust these same politicians when they say that a wealth tax will be a one off event. Without any of that pesky nonsense of a contract of course.

The insistence being therefore that politics is dodgy when considering paying money out but entirely reliable, keeping its word, when raking it in. We really don’t think it is cynical to suggest that electoral expediency might not work out that way.

More Tapes from MI5

Victoria Street 

January 2021 

“Humphrey.” 

“Yes, Minister?” 

“People are awfully pleased with my Energy White Paper.” 

“You may be referring to our White Paper, Minister.” 

“Yes, yes, of course.  I’m really very grateful for your contribution, Humphrey.  I believe you used to work for Priti Patel?” 

“An effulgent experience indeed, Minister. May I ask what aspects of our Paper have met with particular appreciation?” 

“There are so many: lower energy bills for consumers, massive private investment with more jobs, great British innovation and engineering strengthening the economy, and zero carbon saving the planet. It’s a fairy tale scenario.” 

“Yes, indeed, Minister, what is not to savour? May I respectfully suggest, though, that you avoid the term ‘fairy tale’ – open to misinterpretation, you know. Perhaps something like “owing to a fortuitous concomitance of buildouts, the UK will be in a favourable energy space.” 

“Best of all, it puts the Great back in Britain. We may be only 1% of the pollutant problem but we have the vision and the leadership.  The exact words I used in my foreword, Humphrey, were ‘The UK is leading from the front in the transition to clean energy, while ensuring that we leave no one behind.’” 

“Did anyone mention that the numbers don’t add up?” 

“Humphrey, really!  No one expects our numbers to add up.  We are talking vision, aspiration, motivation, the big picture.” 

“Well, Minister, at least you can count on hydrogen to go with a bang! We mention it 133 times, twice as often as nuclear, and that used to go with a bang too.” 

“Humphrey, are you feeling all right? Isn’t hydrogen the gas dentists used to use to knock one out?” 

“Not quite, Minister, but the effect is much the same.” 

“Well, whatever it is, hydrogen is jolly good stuff.  It will power our vehicles, heat our homes, and provide industry with all the energy it needs. My friends in the oil business can make it from their existing sources of natural gas; otherwise all those pipelines and infrastructure would go to waste.” 

“Yes indeed, Minister. Unfortunately natural gas accounts for 80% of fossil fuel CO2 emissions which makes it public enemy #1. No wonder your oil company friends want us to take it off their hands. Natural gas is mostly methane CH4 so by removing the C - in the form of CO2 – you are left with pure hydrogen.  And you then have to bury the CO2, whether in tanks below Liverpool Bay or huge holes in the ground.” 

“Blimey! What is that going to cost? The White Paper has many expenditure commitments but no totals.  And who will pay for it? And what return do we get for our money? And I’m told it will double the cost of heating a home.” 

“Do I need to remind you that we are the visionaries?  Our White Paper says costs ‘will depend on the level of demand, and the cost and availability of other low-carbon technologies, particularly low-cost clean hydrogen.’”  

“I say, Humphrey, that’s excellent.  The costs will be what the costs will be.  Can’t say fairer than that. I know I flunked GCSE Chemistry but what ‘s the difference between clean hydrogen and any other sort?” 

“Well it isn’t the atomic hydrogen, H, but the hydrogen molecule, H2, and that comes in a range of colours: blue, green, grey, brown, black and turquoise. The blue is made from natural gas as I mentioned before, Minister, whereas green is made from water using electrolysis. As our White Paper says, ‘PEM (proton exchange membrane) electrolysers are capable of producing zero carbon hydrogen’. ‘Zero carbon’ means there’s no CO2 to capture and bury.” 

“Well global warming should ensure we don’t run out of water.  It’ll be slopping all over the place.” 

“I fear that’s the wrong sort of water. Electrolysis needs fresh drinking water and there’s a global shortage of that.  One way and another, green hydrogen is a lot more expensive than blue. The other colours arise from other raw materials, e.g. brown from brown coal, with various levels of carbon emission. One could blend green with one of the other colours to keep costs down but it would not be a zero carbon solution.” 

“You are blinding me with science.” 

“Our White Paper is more subtle: we will adopt today’s colour blind conventions by calling the blue green, or maybe turquoise because the Germans are very keen on turquoise.  After all, hydrogen is hydrogen.” 

“Good chemists, the Germans. No one is yet able to mass produce the green stuff anyway.” 

“If I may say so, Minister, you have discerned a profundity not unrelated to the reality of the situation.” 

“Well Humphrey, it may be our paper but I don’t understand it.  Our strategy is all about hydrogen yet our Figure 3.4 shows, by 2050, only 7% of our energy needs coming from hydrogen, of whatever colour, and 4% still coming from natural gas which has mysteriously become zero carbon by then. The action is all really with nuclear and renewables.” 

“Dear me, Minister, I should not have to explain this. The Prime Minister sent us his 10 Point Plan which highlights hydrogen and demanded we inculcate verisimilitude to substantiate our world leadership of zero carbon energy. We must burnish what he has furnished. Nuclear and renewables are old hat; the White Paper had to show inspiration and innovation. The game is the thing and hydrogen is the game.” 

“Thank you, Humphrey.  Kindly close the door on your way out.”

Reasons for optimism - Gene-editing

Genetic modification has penetrated popular thinking by receiving much publicity, even though some of that has verged on hysteria. Meanwhile, a scientific breakthrough has been achieved that gives equal, if not greater, grounds for optimism. It is the discovery and manipulation of what are called clustered regularly interspaced short palindromic repeats, otherwise known as CRISPR. This differs from GM because it involves editing the genes within an organism, rather than introducing those from an alien species.

What makes CRISPR gene editing so effective is its precision. Scientists can use it to locate a chosen sequence within the organism’s DNA, and then delete it or modify it by replacing unwanted sequences with desired ones. When fully developed, the technique will enable us to delete the defective genes that lead to genetic diseases, and to replace them by non-defective ones. This opens the prospect of eliminating such conditions as Huntington’s disease, haemophilia, or spina bifida.

It has been used to treat inherited deafness and sickle cell anaemia in mice, and it has the potential to create powerful new antibiotics and antivirals. In theory, though not yet in practice, it could be used to make mosquitoes impervious to malaria, and raise the chances of the altered gene being passed on to 100 percent. As with genetic modification, it could be used to create more nutritious crops, or ones better able to cope with drought.

Concern has been raised about the prospect of “designer babies,” with parents screening our undesirable genetic traits in their offspring, and inserting genes that would lead to better looks or more intellectual potential in the child, even before it was born. These would be subject to ethical controls, but the technique could be used to give every child born the chance to lead a life free from suffering or life-limiting conditions.

The technique is fast, effective and cheap. What might have taken weeks at enormous cost can now be done within hours for perhaps $75. It gives huge cause for optimism that humankind will be less susceptible to the damage and distress that nature might inflict, and better able to take control in order to give people the chance of healthier and better lives.

Seriously Mr. Drakeford, seriously?

There seems to be a certain misunderstanding of how vaccination works here from Mark Drakeford, First Minister of Wales:

We will be using all the Oxford vaccine that we get as we get it, the Pfizer vaccine has to last us until into the first week of February.

So we have to provide it on a week-by-week basis. What you can’t do is to try and stand up a system which uses all the vaccine you’ve got in week one and then have nothing to offer for the next four weeks.

We won’t get another delivery of the Pfizer vaccine until the very end of January or maybe the beginning of February, so that 250,000 doses has got to last us six weeks.

That’s why you haven’t seen it all used in week one, because we’ve got to space it out over the weeks that it’s got to cover.

Vaccine delivered into arms protects. Vaccine sitting in the fridge does not. There is absolutely no point at all in having vaccine in fridges rather than arms. A vaccine is not like a bandage, or an antibiotic, where it is useful to have some on hand. Rather, with a vaccine, get it into arms and if there’s a gap to the next batch so, there’s a gap the the next batch. More people are protected for longer the faster the move from fridge to arm.

This all rather illustrates a most unkind anonymous comment about the problems of devolution in a general sense. There aren’t all that many bright people who actually desire to enter the cesspit of politics. Thus whatever the political unit is it has to be large enough that those competing to run it are competent to do so. In very small units the selection available of those willing might not include enough of those able.

Of course, no, no, of course, this does not apply to a nation like Wales but it is something we worry about concerning local authorities, regional assemblies and the like. Our solution being to devolve power not to the smaller political unit but to the people not involved in politics - a much larger group than those willing to enter the cesspit. That is, restrict government to only those things that must be done and which can only be done by government and leave the rest to whatever structures people wish to use as and when. You know, markets.

Betteridge's Law

Betteridge’s Law has two different meanings. The first is as stated:

Any headline that ends in a question mark can be answered by the word no.

As stated it is not actually true - “The correct amount of QE is?” can only be answered with “No” in a - not very - humorous attempt to deny the utility of the concept itself. The deeper truth is as a warning to journalists (or, in the older style, the subeditors who used to write headlines) not to write headlines that can be so answered. Or, in another tradition, only when it is known that the answer is no but everyone would prefer not to say so.

At which point, The Times:

Can Joe Biden restore the soul of a divided nation?

Well, no, clearly not. Nations don’t have souls, even the most collectivist of religions insists that only human beings do. Further, division is something rather to be desired in a nation - we after, after all, all different bundles of desires and wants and one single national purpose is going to run roughshod over that idea.

But rather more important than that, and what makes this something for us to comment upon, is that talk of souls and nations is not the subject of politics. That last is about organising the rubbish collections. To start talking of politics and eternal verities is to reify what is meant to be a very workaday process. As is well known we tend to favour minarchy around here and this is one of the reasons why. Any expansive political system of management is going to end up sending tendrils into areas where that system simply doesn’t work at all, let alone badly.

Government should do only those things that must be done and which can only be done by government - a small set of actions.

Another way of putting this, which recent or even future holder of the office of President (or even, which politician in any office) would you entrust your soul, individual or collective? So, no…….