We do hope someone tries to use this particularly stupid argument

We most certainly don’t want the event to happen but we would indeed love to see the argument deployed:

Over the last few weeks, however, it has started to pick up some credibility. Intelligence agencies in the US and elsewhere are now investigating the possibility that Covid-19 was created in a Chinese laboratory, and leaked out either by accident or design, and for now President Biden is keeping an open mind on the issue.

Here is the important question for the markets, however, and one no one is thinking about yet: what if it is true? It would be the biggest shock to the global economy in decades. Why? Because governments would surely have no choice but to retaliate with sanctions and demands for full-scale reparations.

Chinese goods might suddenly be locked out of the global market, creating shortages and sparking a vicious cycle of inflation. Global trade would collapse. And the financial markets would crash as Chinese money was pulled out.

Even without full-scale retaliation, confidence in China would collapse. Paradoxically, it would cause far more damage than even Covid itself - and that makes it the biggest threat to economic stability right now.

We’ve no collective nor corporate view on the origin story, we tend to leave that corner of the intellectual heavy lifting to Matt Ridley (as he divides and specialises with us on things like mineral availability). However, Occam’s Razor does lead to the idea that inadvertent release from a lab working on gain of function to make bat coronaviruses (coronaviri?) infectious in humans is a more believable story than the so far untrackable Fried Bat Soup one.

Put that aside though and the part we would like to see someone try. In order to punish these people over there we’re going to entirely upend the international trade system. This will mean great suffering for you, you here. The citizens of the US, of Europe, of the UK, will see their living standards plummet in order to really put pressure on the Chinese government. That “more damage” part means that it will slice 15 to 20% off your lifestyle.

That is, using trade restrictions, protectionism, means that we will be paying the costs of the punishment to them.

This is, of course, a particularly stupid argument. Rooted in that old mistake about trade, refusing to grasp that the imports are the aim of the entire game. The whole point being to loose our consumption on those things Johnny Foreigner does better, cheaper, or faster, than we do domestically.

We agree it’s a very common argument, it’s even a policy deployed often enough. But it’s always small in total effect. When it becomes an immediate 20% slice off the living of everyone all at the same time then the absurdity of the underlying idea should become obvious.

We are to become poorer to punish them.

The battle against protectionism is a continual one. But imagine if they actually tried it on the basis above - that would put the issue to bed for another generation, wouldn’t it? Why, we might even get the only logically defensible trade policy there is - unilateral free trade - out of the attempt.

How to fail affordable housing: bureaucratise it

Once upon a time, local authorities and housing associations, funded by private donations, such as the Peabody Trust (1862) provided affordable housing, alongside some employers. That worked fine until Margaret Thatcher won votes in the 1980s by allowing council tenants to buy their homes at discounted prices and failed to leave the proceeds with the councils to enable stock to be replaced.  

The main methodology adopted since then has been to use the “planning gain”, i.e. the increase in the value of the land as it is re-zoned to building and planning application approved.  Known as a “Section 106 Agreement”, it is essentially a bribe so the local authority can off-load social development costs, be they for roads or affordable homes.  Developers are usually happy to have the roads and necessary attributes but wriggle out of commitments they dislike, notably affordable homes. They make little or no money from affordable homes and have rather a Victorian attitude to housing the impoverished within their gentrified estates.  It makes the executive houses harder to sell.   

The Ministry of Housing, Communities and Local Government (MHCLG) has recognised that this system does not work and proposed a “Community Infrastructure Levy ……a nationally set, value-based flat rate charge (the ‘Infrastructure Levy’). A single rate or varied rates could be set.” (p.22) This was ill-thought out, if it was thought through at all: a national levy could not both motivate each local developer and, at the same time, maximise the income for affordable homes nationwide. It would be about as successful as the Poll Tax. 

That said, any policy for affordable homes should be funded, at least in part, by planning gain.  There is no reason why the developer should pocket it.  The 2020 Planning White Paper does say (p.60) that about 30,000 (a suspiciously round number) affordable homes were built in 2018/19 - 12.4% of the total – as a result of Section 106 agreements.  

The Housing, Communities and Local Government Committee’s report “Building more social housing” defined rents as being “only affordable when they do not exceed one third of household income” (para. 23). When the Committee quizzed the Minister for Housing on how many affordable homes were needed, he responded ““we need more homes, more affordable homes and more socially rented homes”, but that he did not think it was right to put “a number on the number of homes that need to be built of one tenure or another” (para.51).  

On 30 June 2020, the Minister tweeted that the 2021–2026 programme would deliver “...around 36,000 affordable homes a year”, which is a lower output than 9 out of the last 10 years. According to the Committee “There is compelling evidence that England needs at least 90,000 net additional social rent homes a year” (para.53) and they went on to show how that could be financially justified. By December, MHCLG had moved in the opposite direction: the target dropped to 26,000 a year for the next five years, costing them, or rather us, £7.4bn.

Annex 2 of the 2012 of the National Planning Policy Framework defines what is affordable as, basically, anything 20% or more below market price. The definition of those entitled to affordable housing is to be savoured: “All households whose needs are not met by the market can be considered in affordable housing need.” How many that might be is not quantified, still less the extent of future unmet need. 

However, MHCLG has a precise formula for calculating future needs: “ Total newly arising affordable housing need (gross per year) = (the number of newly forming households x the proportion unable to afford market housing) + existing households falling into need”. The trouble is that MHCLG has little or no idea of any of the numbers on the right hand side of the equation. 

But they do have an “Affordable Homes Programme”. This will operate through Homes England, a quango, which “will create a more resilient and diverse housing market. This means partners will also be expected to focus on promoting significant use of Modern Methods of Construction (MMC), high-quality sustainable design and working closely with local small to medium-sized enterprises (SME) housebuilders.”  

“Homes England” excludes London where “Overall the GLA aims to support 82,000 affordable homes between April 2021 and March 2026. This will see investment partners in London make a significant contribution to the national target of 180,000 starts by 2026.” “Over half of these starts across the new programme will be at Social Rent – where we know there is the greatest need in London. The remainder will support households into home ownership, through the delivery of London Living Rent or Shared Ownership homes.” 

The 41 page “Homes for Londoners: Affordable Homes Programme 2021-2026 Funding Guidance” (November 2020) is immensely complex with all kinds of categories of affordable homes and rules and regulations for developers and tenants/prospective owners. Although it gives the impression that only new-build homes are being funded, this may not be the case: “91. The Mayor will use the Affordable Homes Programme 2021-2026 to maximise the number of new homes in London and is eager to ensure funding results in net additionality. For this reason, the GLA will only fund a limited number of acquisitions of existing homes through this programme.” The good news for MPs is that Sadiq Khan will provide them with new houses as their salaries are below his £90,000 limit for shared ownership. (Para 22) 

One of the mysteries is why London is being treated differently. The additional layer of bureaucracy (the GLA) sits between the MHCLG, who still intervene when it suits them, and the Greater London local authorities who actually authorise these homes. The other bureaucratic layer, Homes England, acts similarly for the rest of the country. 

If you ever imagined developers find the sites, get planning approvals, employ builders and sell the homes to the future owners, whether private, housing associations or local authorities, think again.  Homes England, with only 1,042 staff in 2019/20 (albeit up 20% from the year before) did it all single-handed.  According to its Chief Executive, “I’m incredibly proud that we have exceeded our annual delivery targets...and in the number of homes we have delivered that were additional to the market [sic], as well as surpassing our target for affordable housing delivery.” Its Annual Report does not quantify any future targets, just the ones surpassed, but it would be churlish to imagine those were finalised after the event. Amongst its many other achievements, it has delivered a modern slavery awareness webinar and it “continues to create a hostile environment for modern slavery and ambiguous supply chains.” (p.29)  

Homes England was founded in 2008 in succession to the Housing Corporation. Its original role was narrower than it now seems to enjoy, namely just to assist housing associations to acquire affordable housing – that and no more.  If we need Homes England at all, and that is questionable, it should be restricted to its original remit. 

With the Affordable Homes Programme, Homes England and Homes for Londoners, the government has created a dense layer of expensive bureaucracy.  It is unnecessary for a simple reason: central government is trying to intervene top down in a process that should be driven bottom up.  Local authorities have a far better grasp of what housing in general, and affordable homes in particular, are needed where than the MHCLG or its affiliated bureaucrats.  They also have a far better grasp of what resources are needed from the centre to meet those needs.  Their annual housing plans, and consequential financial needs, would be unlikely to total to national needs, nor what HM Treasury is prepared to provide, but at least the negotiations would start from reality.  Redundant High Street shops and office space post-pandemic should be factored in as well as planning gain, not to mention the savings from the removal of Kafkaesque meddlers which would streamline, as the government claims it wants, planning processes.  Less bureaucracy, more affordable homes.

An interesting bit from JB MacKinnon's consumption porn book

The Guardian tells us of a new book insisting that we should all consume less. Because, well, because the author hasn’t understood the economy actually. Still, there’s one interesting part:

The US population is 60% larger than it was in 1970, but consumer spending is up 400% (adjusted for inflation) – and other rich nations, including the UK, aren’t much better.

There are any number of people who try to tell us that incomes, wages, haven’t risen in these decades of neoliberalism. But there’s the opposite statement. Real wages are what it is possible to consume. So, if consumption has risen then real incomes and wages have.

The solution, apparently, is that this was all a bad idea:

He wants us to act on that discomfort. But he’s not suggesting we live entirely off the land. In his hypothetical model he applies a 25% reduction in consumption – a figure “modest enough to be possible, dramatic enough to be earth-shattering” – and while he won’t specify a figure when discussing what our real-world efforts should be in the coming years, something in this ballpark might well be the goal.

That doesn’t just mean fewer physical things; it’s also less electricity, travel and eating out. “Basically $1 spent is a consumption dollar; I’m not fussed whether it’s spent on a canoe or a powerboat,” he says. “If you want a rule of thumb for how much impact you’re having as a consumer, the best one is: how much money are you spending? If it’s increasing, you’re probably increasing your impact; if it’s lowering, you’re probably lowering your impact.”

That is, we must all be poorer because something or other. It’s not an entirely convincing suggestion to be honest. It’s all also based on an entire misunderstanding of the economy. Instead of this consumerism thing we’re apparently expected to:

We participate in communal activities, such as tending public gardens, engage in social movements and take care of children and elders.

The thing being that that’s all economic activity.

He points to an uplifting case study from London. In Barking and Dagenham, one of the city’s poorest boroughs, the “Every One. Every Day” initiative brings together locals to cook, partake in poetry, craft and hair-braiding sessions, and spruce up common areas, all of it free. “For many of the people participating, it’s deeply engaging and profoundly affecting,” he says. “In a lot of places, if you don’t have the cash to consume, there’s nothing to do; the closest I came to tears in researching this book was watching people who were feeling isolated and excluded from consumer culture have an alternative put in front of them. That points towards the potential.”

That’s also all economic activity.

It’s true that economic activity that isn’t mediated by money isn’t counted as part of GDP but that’s to do with the method of counting rather than whether it’s activity or not. Growing a vegetable in a communal garden to give away is growing a vegetable which will be consumed just as much as a farmer doing it and our gaining it from a supermarket. It’s still the economic activity of transforming soil and water into dinner.

The advantage of the money intermediation is that we can do this with strangers. This, given that the gains from trade increase with the number of people we can divide and specialise labour over, means that the money economy, that GDP, gives us a higher standard of living for the same resource use. As long as we’re being sensible and counting human labour as an economic resource of course.

The insistence thus boils down to we must reduce our efficient, money intermediated, economic activity and increase our inefficient, non-money intermediated, activity in order to be poorer while still undertaking the same amount of economic activity.

Well, yes. By Jove, even By Toutatis, that is a manifesto to really mobilise the masses, isn’t it?

(happy) Tax Freedom Day 2021

As of June 2024, this is out of date. Please refer to Tax Freedom Day 2024 for the updated statistics.

A very happy Tax Freedom Day 2021 to you. Sadly it is getting later and later each year. And with the grand plans of our political masters ranging from train tracks costing over £100bn, a new Royal Yacht, and the as yet undefined Levelling-Up agenda, not to mention the pandemic, it looks like we’re set for Tax Freedom Day falling later and later still for the foreseeable.

Yet it does not need to be this way. It is a pure political choice to accept the Conservative Party forcing the country to work for the taxman more than they did even under Gordon Brown.

Learn more about how we calcuate Tax Freedom Day here.

We're largely unconvinced by macroeconomics

The conventional and standard wisdom in the general political establishment:

One of the big lessons of the Global Financial Crisis, still fresh enough not to have been wholly forgotten, is that the policy response to a bad downturn needs to be big, fast and sustained. We didn’t get that after the global financial crisis, which in part explains the subsequent decade of economic stagnation.

Therefore go big this time. Which, in reality, means the politicians gain unrestricted access to the societal chequebook. On the other hand, the conventional and standard wisdom among American economists:

“A lot of what he's saying is what everyone is saying over coffee and whispering,” said one prominent economist who proved the point by only saying so anonymously. “He’s an outlier in the public debate because the people that have megaphones aren't saying this on the Democratic side, but he's well within a consensus view in the economics profession.”

That’s Jason Furman commenting on Larry Summers and his assertion that they’ve gone too big.

Our point here being not just to emphasise the gaps between the science and politics - that’s ever with us. Rather, it’s to lead into pointing out how shoddy the science is.

We have decent enough economic statistics for some handful of countries - not even all the OECD ones - going back perhaps 70 years to just after WWII. There have been a handful of recessions in each of those. That’s not a decent evidence base.

Further, we’ve had, this past couple of decades, two entirely different types of recession. One in which the financial system pretty much fell over. Many monetary economists said this was different. Possibly more akin to the American experience in the early 1930s than anything else. Certainly not the same as, say, the 1970s. Now we’ve one where the economy was deliberately shut down and is now being reopened. This is very different and different things tend not to be cured by the same treatment.

We are a great deal more convinced by microeconomics - people respond to incentives, there are always opportunity costs, utility is between maximised and satisfacted and so on. We’re deeply unconvinced that macroeconomics, as a useful policy tool, really works very well. Simply because the evidence base underpinning it is so thin. One good piece of evidence for this being the multiplicity of opinions on what we should do that stems from those reading those macroeconomic runes.

Something that doesn’t come up with an answer - rather than merely supports extant prejudices - isn’t really something we should call science, is it?

Another demand for your money to be spent upon their wishes

There is one part of this which significantly irritates:

‘Priceless’ Brontë manuscripts could be lost to private buyer, warn experts

Historic holdings including handwritten poems by Emily Brontë are set to be auctioned by Sotheby’s, but MPs are being urged to save them for the public

“Priceless” means without a price. Going to auction is a means of establishing the price. Thus even if the collection is currently priceless it’s not going to be for very long, is it - the auction itself being the solution.

The other things wrong with the demand - that government buy it - are worse than irritating of course. The manuscripts have been in private ownership for a century now so their changing hands doesn’t mean their being lost to anyone at all let alone the public. That’s just an excuse. Certain culture mavens wish to be able to control the access to the books without actually having to pay for that power themselves. Thus the demand that the state do it.

Effectively, 65 million people are being instructed to pay for the desires of half a cozen bibliophiles. This is a less than compelling argument.

The correct answer is obvious - you want them then you pay for them. Can’t afford them? Then far from being priceless the amount you’re willing to offer isn’t enough, is it? You’re just trying to use the power of the state to get them on the cheap.

Dear Polly, to criticise statistics it is necessary to know statistics

Polly Toynbee is outraged:

Rattling through a lexicon of lies at prime minister’s questions is so routine that few bother to call out Boris Johnson any more. Besides, on Wednesday all attention was on the vendetta playing out elsewhere in Westminster. But when the Labour MP Gareth Thomas challenged the prime minister on the steep rise in child poverty revealed in official figures this week – 4.3 million children and heading upwards on a steep curve – Johnson boasted shamelessly: “We are seeing fewer households now with children in poverty than 10 years ago.”

Thomas protested at “Boris Johnson’s casual disregard for the truth”. But lies seem to work very well for him, and they’re eagerly echoed as fact by those on the Tory benches.

The numbers are here.

The problem with Polly’s outrage is that there’s nothing, at least in principle, to stop both being true. That there are more children in poverty and also fewer households with children in poverty. We admit that we have not checked either statement but that’s not the point we’re making. If poverty has become more concentrated into certain households then that would explain both.

We might even expect this to happen:

The universally used measure of poverty, in Britain and internationally, is relative, counting anyone living below 60% of a country’s median income.

Well, no, it’s below 60% of median household income adjusted for household size. That adjustment for size not quite, wholly, working. If the modal family is two adults working - which it probably is - then families with large numbers of children, which are more likely to be single earning families, are more likely to be in that relative poverty. Certain people, perhaps, preferring a wealth of offspring rather than storing up consumer riches.

There is a further amusement from Polly’s statistical observations as well:

For obvious reasons, the government grasps on to a different measure called “absolute poverty”. Here’s the oddity of this number: it is anchored in 2010, so it measures how many children are still living on what was the 60% below-median level 11 years ago, when the median was of course far lower, as it rises with growth.

How excellent, so, we all agree that economic growth does matter, also that it has been happening in this decade of austerity then and that average incomes have been rising as a result?

Making farmers into free trade winners

The advent of free trade deals agreed between the UK and Australia, then New Zealand and Canada, and subsequently others, raises the prospect of cheaper food in the shops for UK customers. The economies of scale made possible by the larger farms that tend to dominate the ex-dominions, combined with their efficiency, mean a potential bonanza for UK shoppers. That is the point of a free trade deal. Each side receives what the other does competitively, and trade between the two expands.

The UK was previously tied into the EU Common Agricultural Policy and the Common External Tariff. These were specifically intended to “protect” European markets from the cheap foodstuffs produced outside the EU that would otherwise have been accessible to their citizens. They raised the prices to European consumers in order to keep European producers from feeling the impact of competition from outside. Brexit has given the UK the chance to opt for free trade and lower prices rather than protectionism and high prices.

The National Farmers’ Union (and its supporting MPs) is protesting that the upcoming free trade deals will make life harder for its members. In some cases they may well be right, in that British farmers who can adapt to the changed circumstances might prosper, but those less able to do so might find it difficult to compete. There is a way in which they could be helped without denying UK families access to cheaper food.

Farmers unable to compete could be offered a deal. If they opted to quit farming, half their land could be sold with planning permission for housing, provided that the other half was turned into woodland. The half sold with planning permission would bring in enough money to assure the retiring farmer of a sufficient income in retirement, or enough money to fund a new project.

The UK would gain the housing it desperately needs to make home-ownership a viable option, especially for young people, and the environment would gain the extra woodland as habitat for wildlife. In cases where the new homes might alter the view of nearby dwellers, the requirement could be that the new woods be created around the new houses. 

Such a policy could assuage farmers, would-be home buyers, environmentalists, and current rural inhabitants. And it would do so without impeding the lower food prices that imports promise. It could be a winner.

Both a logical error and trivia over climate change

A groupuscule called Transport & Environment wants us all to know that:

It is clear that private jet use creates a disproportionate impact on the climate, and for questionable social and economic benefits.

However every sector should at least be given the opportunity to decarbonise.

As ever, start with everything else told to us in that conventional wisdom. Does this then mean that every sector should decarbonise? No - entirely the opposite in fact.

We are assuming agreement with the idea that lower emissions overall would be a good idea. But the task, then, is to still maximise human utility within whatever limits there should be. This is not, not at all, the same as saying that every activity, or sector, should reduce emissions.

To illustrate, the taking of a car to gain fresh bread for a sandwich might gain less value, on the whole and roughly estimating, than the same emissions from an ambulance taking a pregnant woman to hospital to be treated for pre-eclampsia. In that second there might be two lives saved, in the first a lunch. Rational thought about limiting emissions would - even given the insistences we are bombarded with about future costs - not demand a reduction in ambulance emissions but would possibly quite happily expunge fresh bread ones.

That is, it is total emissions that are to be reduced, those from all sectors in aggregate, not from all individually. Meaning that we should, rationally, be entirely happy with certain sectors just carrying on.

Whether private jets meet that ambulance standard is another matter of course. But that then brings us to the trivia point.

Private aircraft account for about 2 per cent of aviation emissions

Aviation accounts for some 2% of total emissions. 2% of that is 0.04% of the total problem therefore. This is not just a rounding error it’s something that we’d never even be able to measure the effects of whether it persisted or vanished entirely. We’re really very sure that attention might be paid to things of rather more import. Well, if anyone were actually interested in solving the problem as defined that is.

Sometimes the ignorance is just stunning

We were alerted to the image above from the American Chemicals Society. Which purports to show the elements that we might all run short of in the near future. The idea that we might run short of gallium or germanium is, to put it most politely, silly. The thought that we might run short of hafnium is a claim so alarming as to call into doubt the species of those making the claim let alone their knowledge.

Sadly, this is all being perpetrated by the British Government - we’re all paying for this through our taxes. The source is the “Chemistry Innovation Knowledge Transfer Network” which appears to be these people.

We have gone through this before, at book length. Hafnium is one of the examples we spend considerable time upon there.

For gallium the extraction is from bauxite, the ore for aluminium. We’re not about to stop mining bauxite so we’re not going to stop having gallium available. Just those resources there should be good for a thousand years rather than the 100 the claim is being made about. For germanium the major source is coal. We are unaware of any likely shortage of coal.

But it’s hafnium that really shows that someone isn’t thinking.

There are no ores, no economic deposits of hafnium. They simply do not exist at current prices. However, all zircon (the sand, which is processed to make zirconia, the oxide, or zirconium, the metal) is 2 to 4% hafnium. We usually don’t bother to separate the two because it’s a pain and why bother?

However, sometimes we do and that’s where our hafnium comes from. Are we going to run short of this in the next 100 years, as claimed? Well, no, not really, Because as we can see from the claim in the chart even their estimation of the risk to zirconium supplies is much lower. So if we’ve still got zircon we’ve still got hafnium.

Well, perhaps there might not be enough contained? Accurate numbers are difficult here but rough estimates are that the world uses some 500 tonnes a year of hafnium as hafnium. It also processes some 600,000 tonnes a year of zircon/zirconia (note that tonnages of ores and concentrates are not the same as material contained). At that 2 to 4% Hf content - call it 3% between friends - that’s 18,000 tonnes a year of hafnium of which we use 500.

We are not going to run out. Really, we’re not.

And yet your and our tax money is spent on promoting this idea that hafnium is going to be in short supply. Why? Well, because we must have a circular economy, that’s why. The argument in favour of a circular economy being that we might run out of hafnium. The problem being that the argument starts with the desire for the circularity rather than the examination of the hafnium supply.

And yes, just to repeat this, we’re all paying for this propaganda. Perhaps we should stop doing so?