The glory of those self-solving problems

Time was when the British supermarkets were renowned for the fatness of their margins, the richness of their profits. So much so that the 1990s saw an investigation into what should be done.

BRITAIN'S pounds 60bn supermarket industry is facing another lengthy investigation into alleged profiteering after the Office of Fair Trading yesterday referred the sector to the Competition Commission.

The commission has been given 12 months to report on whether a monopoly exists amongst the supermarkets and whether they exploit that power against the public interest.

Note that was at least the second - memory dims as we go further back than that. No one did very much about it other than study the problem of course. Which meant it was all repeated near a decade later:

CONSUMER watchdog the Office of Fair Trading is to refer the role of supermarkets in the UK grocery market to the Competition Commission for an inquiry.

No one did very much about it other than study the problem of course. Good jobs with fat paycheques in studying.

And today?

Most seriously of all, the deep discounters Aldi and Lidl moved aggressively into the UK market, with a limited range, low cost formula that the big chains struggled to match. The result? Not much growth, and not much in the way of profits.

The fatness of those margins, the richness of those profits, attracted the greed - sorry, enlightened self-interest - of other capitalists. This competed away the richness of those profits, the fatness of those margins.

Which is how capitalist and market economies work.

We do indeed face problems in this vale of tears and yet by getting the basic system right we find that many of them are self-solving. Isn’t that lovely?

There might be a reason George Eustice is at environment

This appears to be coming from George Eustice at whatever the environment agency is called these days. At least, it’s going out over his name which makes him the Minister responsible:

The decision means that companies exporting brands such as Evian, Volvic, Perrier and St Pellegrino will face additional red tape. Last year, about €114m (£98m) worth of mineral water was imported to the UK from the EU, according to the Eurostat agency. Currently any water recognised as “natural mineral water” by an authority in an EU member state is automatically recognised in the UK. From Jan 7, suppliers will have to have their water recognised by Food Standards Scotland, Defra or the Food Standards Agency, or be banned from Britain. British mineral waters have had to apply for recognition in an EU member state before exporting to the bloc since Brexit took effect on Dec 31.

As everyone who has ever bothered to crack open an economics book knows the purpose of trade is to get our hand - or gullets - upon those lovely things made by Johnny Foreigner. Putting bureaucratic barriers in the way of our doing so is therefore not a good trade policy.

Note that no claim is being made that those foreign regulations are no good, inadequate or lacking in some manner. The actual claim being made is that the governments of the remnant European Union are making their citizenry poorer therefore the British government must make Britons poorer in retaliation.

This doesn’t really work as logic now, does it? It being just yet another proof that the correct tit for tat response to repeated iterations of the Prisoners’ Dilemma does not work for trade issues. The actual correct trade policy, even in the face of provocations by those damn’d foreigners, is unilateral free trade. You do whatever you want and we’ll do what is best for our folks here at home.

That best being that the British government should not be putting artificial barriers in the way of Britons enjoying whatever mineral water it pleases Britons to enjoy. Or, to put it the other way around, what in heck is a British minister doing deliberately plotting to make Britons poorer. Doesn’t he work for us?

Still, in that desperate search for a silver lining in absolutely anything at least he’s only at environment, not trade.

Gell Mann Amnesia, Hayek and rare earths for electric vehicle batteries

Gell Mann Amnesia is where you read a newspaper article on your own subject of expertise and note that they’ve managed to entirely cock up the sophistications and subtleties of the area to the point of being wildly misleading to completely wrong. You then turn the page to a piece outside your own area of direct knowledge and believe everything they say.

This always does happen.

Hayek’s point about trying to plan the world is that knowledge is local, no one ever does, or can, gain the necessary information to be able to plan everything in any detail.

Colin Brazier on GBNews gives us an example. This is not to attack this specific outlet, these mistakes are more general that that, this is an exemplar.

The subject is rare earths to make the batteries for electric vehicles. The claim is made that neodymium is used to do so. It isn’t. Nd is used in magnets, electromagnetism means that you use Nd to turn movement into electricity - in a turbine say - or electricity into movement - in an engine. You do not use it in a battery. You might well use lanthanum but that’s a different element, even if it is still a rare earth. The other metals mentioned, cobalt, lithium and so on, aren’t even rare earths.

Yes, this does matter because the supply problem with rare earths - a different one from many other metals - is not going mining for them. This is between relatively and entirely trivial as an exercise. There are plenty of sources, for example, in the waste streams of other mineral activities. We - we meaning any combination of the UK, US, EU and so on, whether separately or in combination - can gain access to mixed rare earths at the drop of a hat.

The problem is that “mixed” bit. The difficulty is in separating the 15 lanthanides out into their individual elements. This requires a plant that costs some $1 billion using the current technology. There is a proposal for a mini-plant to be built upon Teesside which would cost £200 million - and do about a quarter of the job, extracting only a few of them from the mixed source.

If, and we do insist upon that if, there is to be some intervention from the centre into this industry then good logic would suggest it should be in solving that separation problem, not the mining one. Good logic because the mining part isn’t a problem while the separation is.

It is even true that there is a potentially - potentially! - viable alternative technology, vacuum distillation of metal halides, which would solve that separation problem. As it happens the UK is one of only two - and of the two the better one - global centres of excellence in the basics of this technology.

Guess what isn’t being discussed as a potential British solution to this rare earths problem? Which is where that Hayek part comes in. Because the British government does think it would like to solve this problem. It’s willing to spend considerable sums on doing so too. But it doesn’t have the knowledge to have identified what the actual problem is therefore isn’t trying to solve the actual problem.

The Gell Mann part is how - we all do get our information outside our own areas of technical expertise from the media - the general conversation gets things wrong. The Hayek part is how government does. Even when there is a problem to be solved government does the wrong thing.

Which is just another reason why we’re not in favour of that government involvement in the economy, in that idea that planning will be the solution to our economic woes. Observation of that reality outside the window tells us that the information to identify problems is lacking thus solutions never are funded.

Of course, there’s always the opportunity for the government to prove us wrong here but we’ll not be holding our breath……

Evidence versus interpretation

A story Karl Popper told in his “Conjectures and Refutations” tells of the intellectual excitement that gripped Vienna in the wake of the post WWI collapse of the Austro-Hungarian Empire. Theories, ideas and revolutionary slogans clashed with each other in a stimulating torrent of intellect. Four theories were among those holding prominence; they were Einstein’s theory of relativity, Marx’s theory of history, Freud’s psycho-analysis, and Alfred Adler’s so-called ‘individual psychology.’

The young teenaged Popper (born in July 1902) had friends impressed by the apparent explanatory power of the theories of Marx, Freud and Adler. Popper wrote that to his friends “these theories appeared to be able to explain practically everything that happened within the fields to which they referred.”

Popper relates a personal experience when he had barely turned 17, yet confronted the great Alfred Adler with a case that didn’t seem to fit. Popper reports that nonetheless,

“He found no difficulty in analyzing in terms of his theory of inferiority feelings, although he had not even seen the child. Slightly shocked, I asked him how he could be so sure. ‘Because of my thousand-fold experience,’ he replied; whereupon I could not help saying: ‘And with this new case, I suppose, your experience has become thousand-and-one-fold.’”

Popper spotted that Adler’s theory, like those of Marx and Freud could explain everything because it expressed nothing more than a determination to interpret events in a preconceived way. Because of this there was nothing that could disprove these theories. Everything that happened could be accommodated within them as further ‘proof’ of their universality.

He realized that Einstein’s Theory of Relativity was different. It had predicted that during the total eclipse of 1919, two stars near the sun would not be in their expected positions because, if he were right, their light would have been bent by gravity. A team was sent out to observe, and found that the stars were where Einstein had predicted. But he could have been wrong. Einstein’s theory lived dangerously by predicting observations that could have gone otherwise, but the theories of Marx, Freud and Adler did not.

The observed world we experience can lead us to retain, modify, or discard theories according to their abilities to predict what will be observed. This is how scientific progress is made. It might comfort some people to hold to theories that interpret events along preconceived lines, but these theories are by no means scientific, even though their protagonists might talk about the “sciences” of history, society and behaviour. They belong in a separate compartment to that of science.

Into that non-scientific compartment goes Critical Race Theory, along with the other theories that tell us more about the person holding them than they do about the world beyond them.

Well, that didn't take long then

It was three days ago that the Society of Motor Manufacturers and Traders was insisting that there must be large government subsidy to the building of battery gigafactories. Otherwise, woe is us, this will be the death knell of the British car industry:

The Society of Motor Manufacturers and Trades (SMMT) has launched a new Go Fund Me campaign. Except, of course, they’re demanding rather than asking politely for our money as they insist that government pick up many of the costs of their business.

We must all pay for gigafactories and fuel cell plants and rewiring the entire country for battery chargers and on. The correct answer to which is do it with your own money mateys.

We now learn that:

Nissan has confirmed plans to build a “gigafactory” to make batteries for electric cars as well as a new electric car as part of a £1 billion expansion of its Sunderland factory that will create thousands of jobs.

The investment by the Japanese carmaker, its Chinese partner Envision AESC and the government will create 6,200 jobs at the Sunderland plant and its supply chains.

Vast sums of our money, cash from us taxpayers out here, are not required. The capitalists are entirely happy - well, at least some of them are - to spend their own.

We can thus deposit the demand for our wealth into the round under-desk filing cabinet as we always should have done anyway.

Well, that didn’t take long then, did it?

The mythic world versus the real world

Because the real world of actual existence fails to correspond with their world view, many on the Left construct a mythic world in which the things that didn’t happen did, and where the things that did happen didn’t. Joseph Goebbels famously described the ‘Big Lie’ technique he used himself: “If you tell a lie big enough and keep repeating it, people will eventually come to believe it.” The Bellman in Lewis Carroll’s ‘Hunting of the Snark’ said, “What I tell you three times is true.” More prosaically, logicians have described it as the ‘argumentum ad nauseam,’ the supposition that simply repeating something somehow adds to its truth content. It doesn’t. But what does happen is that many Left-wingers themselves come to believe the myths.

They believe that UK manufacturing was destroyed under the 1980s Tory governments, whereas manufacturing actually rose by 7.5%. The service sector grew much more, so the proportion of the total economy taken by manufacturing declined. But it grew, not shrank.

The tax cuts of the 1980s were not paid for by the sale of state assets and the squandering of North Sea oil revenues, as the myth has it, they were in fact paid for by the tax cuts themselves. More money was raised for the Treasury from the lower rates than had been collected when they were higher. And the top 10% of earners who had been paying 35% of total income tax saw that rise to 48% of the total. In the real world, as opposed to the mythic one, the rich paid more of their “fair” share, not less.

The UK coal industry had been in decline for decades as North Sea gas replaced coal gas and oil, gas and nuclear emerged as cleaner alternatives to coal’s use in industry. And UK coal had difficulty competing with cheaper foreign coal. In the myth world Margaret Thatcher ravaged the coal industry, but in the real world Labour’s Harold Wilson presided over the closure of more pits than she did. Far from Tory governments “slashing the public services” over the course of the 1980s, spending on them rose by 17.6%. There were cuts to proposed increases, but core services were expanded, not “slashed.”

Precious public assets were not sold off into private monopolies. That’s the mythic world. The real one saw mostly loss-making state industries that needed subsidies turned into successful private companies that paid taxes into the Exchequer, and huge numbers of the general public bought into them when they were floated. In nearly all cases competition was introduced into industries that had never had it before. What Harold Macmillan called “selling the precious family silver to pay the butler’s wages” was in the real world mostly offloading the costly state junk.

Today’s myths are made no less wrong by repetition. It’s simply not true that poor people can only become richer by having wealth taken from rich people. What is true is that both can become richer together if the right policies generate economic growth. Nor is it true that reducing overseas aid harms the economies of poorer countries. It’s reducing trade with them that does that.

The myth of Brexit so prevalent in Islington and BBC circles is that it was the basic xenophobic racism of the foreign-hating British that reared its ugly head, whereas surveys indicate that the Brits are not like that, but made a rational decision to withdraw from what was clearly on its way to becoming a political union they wanted to be no part of.

Ah well, why bother with the real world if you can seek comfort and consolation from the mythic one? As the biographer of Wyatt Earp was told, “Print the legend.”

One of those gaspingly untrue statements

There are indeed problems in this imperfect world, this vale of tears. The price of food in rich countries not really being one of them.

Nor is there anything new about people treating the obesity epidemic as if it is a simple matter of individual willpower rather than complex systemic change. In the rich world, obesity is an economic issue: the less money you have, the less access to healthy food you often have.

As long as we leave aside the spurious claims made by the organic and biodynamic movements (burying dung in a cow’s horn by the full moonlight to improve the quality of the fruit is a religious observance, not a scientific one) this simply is not true.

As ONS points out the average household food bill is around 10% of weekly income. Yes, this varies with household income but it is not true, simply is not, that healthy food is priced out of the range of the poorer while unhealthy food is not. Not unless we’re to take the excessively elitist view that by definition what the upper middle class eat is healthy, the diets of the proletarians are unhealthy.

It may well be true that there is an income gradient to health. Even that diet will have something to do with this. But this is what George Orwell was talking about. It is not the price of food - which is the lowest it ever has been in the entire history of our species - which explains the variance in the healthfuness of diets between the richer and poorer among us.

That is, it may well be a a complex systemic problem but it’s not an economic one.

Growth and happiness

The connection between economic growth and happiness has been called into question many times. Surveys have been conducted that purport to show that people in the UK, and perhaps other rich nations, are no happier now than when GDP was half the level it now stands at. The argument goes that if we are no happier with economic growth, why should we be putting in the effort, risk using up resources, and perhaps polluting the planet, all to no good effect?

There are several caveats to this analysis. The first is that there are no objective measures of a person’s happiness. We cannot hold a hedometer to someone’s forehead and read off their measured happiness in hedons. We have to rely on subjective measures, and typically these are established through questionnaires. A person might be asked which of five categories of happiness they would consider themselves to be in, ranging from miserable as sin to ecstatic with delight.

We cannot judge what their standards are when they complete these surveys. To some extent, perhaps to a considerable extent, it depends on character as well as circumstances. Things that might make one person happy might make another miserable. Secondly, and importantly, the people who fill in the questionnaires now are not the same people who filled them in decades ago. Standards might have changed over time. People might have learned to expect more out of life than did their predecessors, or maybe less. The spread of 24-hour news coverage, mostly concentrating as it does on crimes, follies and misfortunes, might have engendered an air of gloom and foreboding that makes people unhappier than they were without it.

It is also true that many of the causes of unhappiness have changed. People who a century or more ago might have been unhappy because their grandparents starved to death in winter, or because their child died of diphtheria, are less likely to do so today because of the advances that growth has made possible. But these sources of unhappiness might have been replaced by others that concern personal appearance or relationships. Perhaps people will always find reasons to be unhappy, but growth has enabled us to eliminate many of the unnecessary causes of it by helping us to fund the advance of science and medicine.

Other surveys, also subjective, suggest that the level of happiness is less important to people than the direction of it. Adam Smith spoke of “the uniform, constant, and uninterrupted effort of every man to better his condition,” and Thomas Jefferson wrote of “life, liberty and the pursuit of happiness,” not its attainment, but its pursuit. These surveys suggest that people are happier if they are progressing in life than they are if they live in a static society, even if it is a richer one. It seems to be the game that matters, not the quarry.

One thing growth does is to enable opportunity. It brings new prospects for advance and for progress. It not only enables us to remove more of the unnecessary sources of unhappiness, it also makes it more likely that people can hope to better their condition and happily set about improving their lot in life.

Let’s not be beastly to the Brits

Germany’s Chancellor, Angela Merkel, joined enthusiastically by the French President Emmanuel Macron, wants to stop individual EU members deciding who can or cannot enter their countries and instead have EU-wide border controls. In particular, the Brits, with the nasty variant they have imported from India, shouldn’t be welcome anywhere without lengthy and expensive quarantines.

At one level, it’s the big countries again insisting that The Project goes on. The EU cannot let member states all do their own thing. This is a political as well as an economic union, and it is darn well going to decide political issues, like immigration policies, centrally. That’s a bit harsh, though, if you are a tourist country like Greece, Portugal, Spain, Italy or Malta — the latter being the most-vaccinated country in Europe and far beyond. Not surprisingly, they are objecting to the Chancellor’s idea. They want to control their own borders with the non-EU world, and apart from a few places like the Balearics, British tourists are welcome because those countries rely so much on tourist cash.

And there’s the rub. The two biggest travelling countries in Europe are — or were, before all the travel bans started — and the UK and Germany. There are no border controls in the Schengen that covers much of continental Europe, so (legally or not), there is nothing to stop a German travelling to the Riviera or a Belgian taking a holiday in Tuscany. That kind of internal control is difficult or impossible, which means that once the virus enters Italy, France, Spain or elsewhere, it can be spread round the rest quite easily. Lacking that internal control, Merkel and Macron want to conceal their powerlessness by creating outside controls. It’s a policy of doing something, however pointless, to show that you are doing something.

The single border policy plan is bad business to Europe’s tourist destinations. It’s not even good economics for Germany, which before the pandemic employed two million people in travel and tourism, accounting for nearly 4% of its economy. And after more than a year of lockdowns and restrictions, the travel industry needs all the help it can get. So, what’s the idea of keeping out the Brits? To hope that continental carriers prosper at the expense of British ones, just like the hope that Frankfurt will prosper if the EU’s nasty to the City of London? If so, that’s just wrong, and the worst kind of grudge politics.

Of course, being beastly to the Brits plays well in Russia and China, and Angela Merkel thinks she needs Putin’s Nord Stream 2 gas and China’s billion customers. Both are hostages to fortune. She would have a much better friend in Britain. 

Sure, our case rates are rising, driven mostly by the Delta variant. But then we’re testing so many people, particularly kids in school. So it is not surprising that we will find more cases than many other countries, including EU ones, who test far less assiduously. And those cases are leading, it seems (though these are lagging indicators), to less hospitalisation and deaths than before — perhaps again because so many of them are schoolchildren. Let’s see what happens when the schools close for the summer.

More than that, nearly 50% of Brits are fully vaccinated. In Germany, the next highest by a long way in Europe, it’s only 37%.  And the vaccines are effective — more Brits are dying of Pneumonia and Flu than Covid-19.

Lastly, in the UK there must be a sneaking suspicion that this is the big EU heavyweights just being beastly to the Brexit Brits. A case of “Let’s show them, and EU member countries, that there are penalties for leaving the club. It will discourage anyone from daring to follow. Oh, and there are elections coming up before too long. The economy’s tanked, so a nice bit of foreigner-bashing will go down well.” It’s bad diplomacy, dismal economics, and nasty politics.

Incoherent demands about climate change

The Society of Motor Manufacturers and Trades (SMMT) has launched a new Go Fund Me campaign. Except, of course, they’re demanding rather than asking politely for our money as they insist that government pick up many of the costs of their business.

We must all pay for gigafactories and fuel cell plants and rewiring the entire country for battery chargers and on. The correct answer to which is do it with your own money mateys. The original ICE plants and the associated petrol stations were not government planned nor funded and nor should this transition.

More than that there’s an intellectual incoherence here. The demand is that both those battery factories and also those producing the fuel cells must be built. But they’re competing technologies. At a certain level of abstraction the hydrogen for the fuel cells is the lithium battery - they’re both ways of storing electricity and being able to apply it to the motor driving the wheels.

Fuel cells only make sense if green hydrogen becomes a reality - if renewable electricity becomes cheap enough that large scale production of hydrogen from electrolysis is sensible. So, if green hydrogen never does make it - we think it will be that’s an opinion, nothing more - then fuel cells aren’t the answer. But if green hydrogen does make it then we need the fueling network across the country. If we have that we also don’t need the batteries and the electric charging points because we’re using the hydrogen technological alternative.

It’s also true that if we have cheap green hydrogen then the manufacturing of artificial complex hydrocarbons becomes cheap - possibly cheap enough that it is overall cheaper to have a net zero system by making methanol, or petrol even, and running it through the extant network of petrol stations and continuing to use the internal combustion engine.

Another way to put this is that we simply do not know enough about how technology is going to pan out for us to be able to build for that winner as yet. Something which does make it rather hard to plan matters.

But perhaps more importantly here by insisting that we all pay for both technologies, both batteries and fuel cells, then we’re absolutely guaranteeing that government is picking a loser for one or other of the technologies will be superseded by the other. You know, as opposed to the more normal situation where government is only highly likely to pick a loser.

It is exactly when we face such technological uncertainty that we shouldn’t be using government to make the decision. This is a market matter. What will replace the ICE? Even, what will replace fossil fuels as the power for an ICE? We don’t know as yet - so we need to stand back and see, not direct.