Prices really are information you know
We insisted just recently, with reference to childcare, that prices are information. This is also true when talking about new nuclear power designs:
China is due to fire up an experimental nuclear reactor this month that could revolutionise the atomic energy industry. The reactor is fuelled by thorium, a weakly radioactive element, instead of uranium.
One of us predicted that this was on the way some 8 years back. Merely by observing prices:
The most cheering thing I've heard recently on this subject is that the price of thorium is now positive. That might not mean much without explanation, so here goes: There's thorium in all sorts of minerals from which we already extract interesting metals. The tantalite and columbite that we make our capacitors from for example: there's enough in the wastes from their processing that old factories that used to do this are now Super Fund sites in the US.
Vast sums of money being spent carting off the lightly radioactive wastes into secure storage (actually, just to piles by uranium mills). And if you actually happen to have any thorium around, as I do, getting rid of it is a very expensive proposition.
The usual solution to this sort of problem is that you refine whatever it is up to a useful commercial purity then sell it. But there's almost no one out there still using thorium: thus the price of thorium, given the disposal costs, is actually negative. Until just recently, that is.
Lynas, which has built a new rare earths refinery in Malaysia, will have thorium as a byproduct (there's always Th in your rare earth ores). They've announced that they're getting offers to actually buy it from them: the price has turned positive.
Now, OK, that's possibly only a matter of interest to metals geeks like myself: but what it actually means is that someone, somewhere, is being serious about starting up test runs of thorium reactors. It's the only possible use for the material these days in any quantity.
If someone's buying then someone is at least considering filling up a test reactor. My best guess is that this is the Indian research programme: although it could, possibly, be the Russian one and there are rumours of a Chinese as well.
That’s not a bad prediction even if possibly a little waffley as to precisely who is going to be doing it. But all done simply by observing the fact that someone is, newly, willing to pay for thorium.
Prices are information, prices are therefore something we should pay attention to.
If only people understood their own arguments
Allyson Pollock has managed to get herself extremely confused here:
According to a study by the Competition and Markets Authority carried out in 2016 and updated in 2018, the care homes industry alone was worth around £15.9bn a year in the UK with 5,500 different providers operating 11,300 care homes for older people. In 2020, there were more than 456,000 care home beds in England, with local authorities and the NHS combined having closed and sold off an equivalent number during the preceding decades. For-profit providers, many of them large multinational chains, own 83% of care home beds with a further 13% provided by the voluntary sector.
At the same time, government funding for local authority adult social care in England fell by 55% in 2019-20 compared with 2010-11, resulting in a 29% real-terms reduction in local government spending power. By 2019-20, local authority net spending on care was £16.5bn, 4% lower in real terms than in 2010-11.
The confusion is that she’s adamantly against this process of using the private sector as a supplier here. Yet the argument, as stated, is hugely supportive of the use of the private sector. For the claim is that we’ve the same number of beds available for that care with a reduction in the cost of those beds for that care.
True, a 4% real terms decline in costs isn’t all that much but we should probably contrast that with the usual NHS numbers which are a 2% rise (as Polly T keeps telling us, 4% nominal inflation rate since 1945) in real costs each year.
We gain the same outcome for less money. Why isn’t this a rousing endorsement of the use of the private sector?
Allyson Pollock is clinical professor of public health at Newcastle University
Answers on a postcard to Newcastle University presumably.
A Good Yarn needs how many Spinners?
A Pall Mall club
“Good Lord, Humphrey. What are you doing here?”
“Well, we both happen to be members of the same club, Minister.”
“I know that, and it is very good to see you, but at this time of day, why aren’t you briefing your minister?”
“You may recall that I have now transferred to the Cabinet Office where different rules apply.”
“I’m surprised any rules apply.”
“Indeed they do, but we no longer brief our ministers, Dom Cummings put a stop to that. I am now working with the Government Communications Service (GCS). Ministers tell us what they would like to happen, we decide if it fits with our agenda and, if it does, how the new policy will be publicised.”
“Golly. I thought we were supposed to be a democracy.”
“Indeed we are. Minister. We track what our electorate really, really wants, instead of being side-tracked by MPs with all their pettifogging ideas. Now we have AI to respond to their questions and our Dear Leader shouts at them on Wednesdays.”
“Speaking as a “pettifogging MP” Humphrey, I’m not sure I care for this. The GCS must need an army to govern in this way.”
“Surprisingly few, Minister. At the last count, we had just 8,000 staff, 4,500 of whom are professional communicators. ‘Our goal is to provide an exceptional standard of professional practice to support the government, implementing the priorities of the Prime Minister and the Cabinet to build a stronger economy, a fairer society, a United Kingdom and a global Britain’.Or that’s what it says on the tin. In fact, we get our marching orders from the PM, who tells us and we tell the Cabinet. We also tell the media who then tell the MPs.”
“Mr Speaker gets a bit tetchy when the media hear before Parliament.”
“Yes, he does, Minister, but we’ve solved that by leaking everything a few days before it is formally announced in the Commons. That gives the MPs all the time they need, poor things, to think about what they will be voting for before they actually have to do so.”
“That didn’t work well with the health and social care announcements last week. As soon as we discovered the PM was going to put up national insurance contributions to pay for it, we were up in arms. Never mind manifesto pledges; it was hitting young workers to pay for affluent elderlies that ruffled our feathers.”
“Yes, but that gave us time to modify it and still relieve larger employers of their surplus cash. When you think about what we do for the CBI, they should be more grateful. Anyway, companies do not have votes.”
“I still don’t think the GCS has come well out of this. We promised to reform adult social care, properly fund it and discuss our proposals with opposition parties to achieve consensus. We haven’t done any of that. It is a complete vacuum and we’ve dropped five points behind Labour in the polls – quite a difficult thing to achieve with this opposition.”
“Well, things did not work out exactly as intended.”
“Your GCS team really must explain how social care is going to be transformed when you are giving all their money to the NHS.”
“That is all in hand. Social care comes under local authorities who are all generously funded by the Ministry of Housing. So when the time comes to reveal our wonderful social care reform, we will have to explain that the local authorities have messed up yet again and prevent us from revealing all – or even any. The Director of Communications will fall on his sword and we’ll have a new one ready to step in. No shortage – we have 22 of them.”
“Drum roll, Humphrey. Drum roll.”
“‘We aim to lead the way in developing innovative practices, adapting to the fast-paced, dynamic communication landscape and consistently delivering high-quality results’ but I have to admit that too is just what is says on the tin. It’s a joke, really, and that is what this is all about. The great British public do not care for politicians but they do like jokes, and the thing about jokes is that they are all about how you tell ‘em. So we try to present policy as entertainment; anyone who opposes it must be a pompous bore, not, of course, that I would suggest such a thing in the case of Sir Keir.”
“Great strategy, Humphrey, but a little risky?”
“It does backfire occasionally but then we shoot the monkey, not the organ-grinder. When Dom became the story, not the spinmeister, he had to go. Lee Cain, whose original ‘claim to fame was dressing up as the Daily Mirror "chicken" and pursuing David Cameron during the 2010 election campaign’ followed but fell out with Mrs Johnson and was responsible, according to the same news story, for ‘a series of PR disasters.”
“Humphrey, I am not sure whether your wit or your memory is declining faster. It all looks like a muddle to me and rather confirms Lee Cain’s parting shot, in his paper for the Institute for Government (IfG), that the GCS is not up to the job, staffing should be cut from 8,000 to 2,000 better qualified people and civil servants should be restored as the lead press/official spokespeople in their departments. Alex Thomas, for the IfG, welcomed those ideas but suggested ‘better messaging is no substitute for coherent policy nor a remedy for misleading statements from government’.”
“Minister, your homework is impressive. I expect you have also read the CGS’s latest annual plan?”
“Well as it is spread across numberless departments, it does not have a plan as such, no costs, measurable objectives nor achievements of its own – just attributing other departments’ successes to itself. Cain is wrong, we don’t need 2,000, we don’t need any at all. We just need to train high-flying civil servants to tell us in plain English what the government proposes and why those are good things to do.”
“I think you are being a little unfair. Our 21/22 Plan shows a mass of achievements in the last year, beginning with ‘Our COVID-19 campaigns are estimated to have contributed to saving between 22,629 and 27,658 lives’.”
“That is itself spin, Humphrey – other departments’ successes. The truth is that we came about in the middle of the European pack, a bit better than Italy and a bit worse than Spain, and I cannot see that the GCS has much to be proud about, especially as we had all those vaccines before anyone else did. The COVID messaging was dreadful.”
“I suppose you will regard the ‘priorities’ for 21/22 likewise? Surely the plan’s concluding words bring a bounce to your step: ‘We will promote essential government activity, ensuring our citizens have access to vital services and keeping them informed about critical legislation. From guidance on health and safety at work to information on NHS screening, our campaigns are essential to the smooth running of the country.’”
“Total claptrap, Humphrey. I was going to buy you a small G&T but I think you need a very large one.”
A politically most incorrect truth about childcare
There’s a wave, a surge perhaps, of muttering about the cost of childcare in Britain today:
Somehow we have ended up with a system that’s too expensive for parents (especially single parents) but not lucrative enough to pay staff properly, plus a hidden drag on the economy, as parents reduce their hours because they can’t afford a full-time nursery place. A staggering 94% of those changing their working patterns after having children say childcare costs were a factor; surprise surprise, women were more likely than men to say they’d be more senior or better paid if it wasn’t for childcare considerations.
There’s no money to fix this, obviously; there’s never any money, unless of course the right people start asking.
This isn’t a problem that money can fix. Price are prices and they are information. We might not like that information, we might decide we’re going to ignore it but that information is still there in those prices.
Childcare is expensive to provide. So, childcare is expensive. It’s even true that childcare is more expensive than the income to be earned by doing something else. Or at least this is true for some number of people.
OK, childcare is more expensive than the income that can be earned by doing something else then. That’s just real world information that we’re being provided with by that price system. Deciding that we’re going to hide that by putting the cost onto the taxpayer doesn’t change that base fact.
This leaves us with two possible solutions. Either some people should stop doing that other thing of lower value and take care of their own children, or we should make childcare itself cheaper. No, not simply shift the cost elsewhere, but actually make it cheaper - kill some of the regulatory burden perhaps. That cost shifting, from the person doing the lower value work, doesn’t change the fact that it is lower value work they’re doing.
The very definition of wealth creation is that economic resources - of which labour is one - move from lower to higher value uses. If a job produces less income than the cost of the childcare required to do it then the childcare is the higher valued use of that labour. Society as a whole, let alone the individual concerned, is made richer by the childcare being done directly.
We do have a certain suspicion here. Most ungallant of us and all that but there we are. Those whose alternative labour really is of less value than their own childcare tend to do their own childcare. There are then those whose market labour is worth more than their childcare costs. Say, those who write for national newspapers. But those on the right end of that price information would still prefer that the rest of us pick up their costs. Because who wouldn’t? Or, as we could put it, the taxpayer should pay childcare costs to solve that servant problem for the professional middle classes.
The land link between Scotland and Northern Ireland
The BBC quotes an unnamed “senior” Treasury official boasting that they have “killed off” what he called “the stupid tunnel” that has been proposed to link Scotland and Northern Ireland. If there is any substance in the BBC story, the government should require the Treasury to revive the project by looking at less conventional ways of financing its construction.
The tunnel would reduce the cost and the difficulties of transport of people and goods between Northern Ireland and mainland UK. It would create a symbolic land link between the two, as well an enabling freight to be shipped between the two by road or rail without the need for it to be loaded and unloaded from ships. But it would do more than that.
It would also provide a land link between Northern Ireland and the European Union via the Channel Tunnel. Goods could flow directly by land between Northern Ireland and the EU, facilitating both imports and exports, and expanding trade between the two. Even more than that, it would provide a land link between the Irish Republic and its EU partners. Instead of trade between the two relying on shipping, as at present, freight could be sent up through Northern Ireland, through the new tunnel to mainland Britain, and then down to the Channel Tunnel and across to Continental Europe. Exporters and importers would willingly pay the tolls for both tunnels to gain the speed, convenience and lower costs of a land voyage for their goods.
Facilities would be needed at both ends of the new tunnel, and new communities would spring up on both sides to service the traffic that would flow through it in both directions. These new towns should operate as Freeports, relieving them of many of the costs and regulations that burden businesses outside their boundaries. With these advantages, both of the new towns connected by the tunnel would see massive economic growth. Indeed, they would be boom towns, creating jobs and businesses in parts of the UK that could benefit greatly from such a stimulus.
The new towns and the Freeports would be a means of financing the tunnel’s construction, given the wealth and the revenue they will generate. Japan financed much of its rail construction out of the added value created by its newly-constructed links, and the new tunnel linking Scotland and Northern Ireland could take a leaf out of the same book, using future wealth to fund the costs of construction.
The new tunnel would do more than generate growth and wealth, however. It would also symbolize a closer United Kingdom, one linked physically as well as politically. It would knit us together more closely. Indeed, the suggestion has been made that it might be called the “Unity” tunnel. It would also declare to a new generation that this country can still accomplish great things.
The economic arguments coincide with the political and symbolic ones, and tell us that the tunnel should be built.
If regulation is good then it's regulation that is good, right?
We’re entirely in agreement with the argument that matters need to be regulated. Our differing from the usual story here is that we ask “regulated by whom?” Regulation doesn’t have to be by a bureaucracy, markets and consumers and prices and revealed preferences and all those things are also a form of regulation, often one more effective.
We would though go on to say that if a bureaucracy is going to regulate then it has to actually, you know, regulate:
When a court-set deadline for "premarket" review of nicotine vaping products came and went on Thursday, the Food and Drug Administration (FDA) had received millions of applications but had not approved any. As a result, the agency says, every vaping product sold in the United States—including myriad e-liquids, devices, and parts—is now "subject to enforcement action at the FDA's discretion."
Seven years after the FDA officially declared its intention to regulate e-cigarettes as "tobacco products," in other words, the entire industry remains in legal limbo, existing solely thanks to the agency's enforcement discretion and limited resources.
Seven years to decide whether the world’s greatest smoking cessation tool is legal to sell. The inaction, at this point, leaving the entire market in a legal limbo.
C. Northcote Parkinson did point out that eventually all bureaucracies become merely bureaucracies. They might start out (Pournelle made comments on this point as well) attempting some real world task but in the end they become paper pushers for the sake of protecting the paper pusher budget. Merely a costly sink of uncertainty that is.
The answer, at this point, is to simply close them down. They are not retrievable. It might even be true that drugs and food do require regulation from a government bureaucracy. But this one is broken, is not sufficiently reformable, so the solution is that Carthaginian one and start again.
This applies to rather a lot of things - we’ve made the same point about the British planning system often enough. Blow it up and start again from a blank sheet of paper. As a certain American journalist once pointed out:
“Every normal man must be tempted, at times, to spit on his hands, hoist the black flag, and begin slitting throats.”
Quite so, quite so.
Jobs are a cost, jobs are a cost
The TUC is manfully grasping the wrong end of the stick here:
TUC calls on the UK government and companies to work together to future-proof jobs at risk of offshoring.
The union body estimates that between 368 thousand and 667 thousand jobs could be offshored from Britain if industries fail to meet climate targets and the UK falls behind other countries on climate action.
The argument is that we must spend £85 billion - one number they suggest - on going green in order to preserve these jobs. Which is to get matters very much the wrong way around.
Firstly, the number of jobs in an economy is not determined by either technology or trade. Which jobs are done is, but not the number of them. That number is determined by the fiscal and monetary policies within the economy - what’s demand? Whether we have full employment or not doesn’t, therefore, depend upon our going green or not, nor whether we go green by buying foreign windmills or make them at home.
Secondly, jobs are a cost of our doing something. Assuming that policy does give us that full employment then insisting on having half a million folk building windmills means we’ve not got half a million folks designing games, taking care of babies, fixing the NHS or selling finance packages to foreigners. We are poorer by that diversion of that labour by the amount of banking, health care, child-minding and games that we don’t have as a result of the home grown windmills.
Now maybe it’s more valuable for us to have the windmills than the other things, that’s possible, so perhaps we should have the windmills not those other things. But the argument about how many jobs are created by the windmills is still a ludicrous one. For it’s urging that choice by emphasising the cost of the plan, not the benefit.
For jobs are a cost of doing something, d’ye see?
The TUC is arguing that we must go green because it will be expensive to go green and see, here’s the proof, those half a million jobs are the expense which is the argument for the plan.
This really is firmly grasping the wrong end of the logical stick.
Adam Smith and the division and specialisation of work
As the BMJ is reporting private sector surgery seems to be rather better than that in the NHS:
Planned (elective) surgery in an independent sector hospital in England, and funded by the NHS, is associated with shorter lengths of stay and lower readmission rates than the same treatment in NHS hospitals, finds research published online in BMJ Quality & Safety.
The findings were consistent for 18 common procedures performed between 2006 and 2019 on more than 3.5 million patients.
Since 2009, NHS patients in England have been able to choose where they want to be referred for non-urgent hospital treatment, and their choice can include independent sector hospitals.
The NHS spend on independent sector providers rose steadily from 3% in 2006-07 to 7.5% in 2015-2016, with the purchase of elective care one of the fastest growing areas of NHS expenditure on the independent sector.
We can’t say we’re surprised of course. Adam Smith did rather point this out 245 years ago and counting - the division and specialisation of labour. Folks who do things repeatedly get better at them, more productive. So, we should split up tasks so that people can so specialise and thus become that better, more productive.
The value of the marketplace is that it provides us, through the price system, with the measure of who is better, who produces a greater value of output for the same or lesser cost of input.
While many factors can influence the course of hospital treatment, the researchers speculate that “greater technical efficiency may explain some of the findings in our study.”
Quite so, run the hip replacements though the places which specialise in hip replacements and we’ll gain a better outcome.
The argument never is, never has been, that markets are somehow better. Rather, that they’re the method by which we discover what methods are better - who should be doing which bit then?
Aren't we being assured that all this net zero will be cheaper?
It is possible that dashing to net zero will be cheaper - through technological advance - than the current set up. It is possible that net zero will be wildly more expensive than that current set up. We think it will be the latter for there is a reason we use the current set up, it’s cheaper.
What we’d all like of course is some absolute. Some method of being able to decide this question one way or the other, definitively. Here that is:
The Government should introduce a carbon tax on imports to protect domestic companies that are subject to the UK’s “net zero” climate policies, a report backed by major UK manufacturers has said.
A carbon import tax could prevent so-called “carbon leakage” – where Britain cuts pollution at home only to import more dirty goods instead as they are cheaper. It could also stop producers moving abroad.
If we need to have trade barriers against people doing it the cheaper way then that is obvious proof that not doing it the cheaper way is more expensive. As with all tariffs this is a call for a tax upon consumers. The total cost to consumers being that tax plus the price rises inside the tariff barriers caused by the tariff barriers.
The very fact that an increase in costs - a decrease in living standards - is being demanded to make such net zero policies work means that, by absolute proof, net zero will make us all poorer.
Making ourselves poorer is not, except among the most ascetic sects, known as an aim of economic policy. Plenty of economic policies - socialism, buy local, vast government, high tax rates - do make us poorer than we need be but even then the poverty is rarely declared to be the aim.
There is an alternative policy available. One which we thoroughly support. We all do know that it is technological advance which will solve the problem. So, let’s develop the technologies first, then deploy them when they are cheaper. This is already true of, say, solar power in Abu Dhabi (we hear stories of 1.5 US cents per kW hour for example) and isn’t of tidal lagoons in the Severn. Do what works and don’t do what doesn’t seems a reasonable enough guide to life and the economy.
As to deciding between what does work and what doesn’t, as always the price system is your friend.
We're not sure that George Monbiot is being serious
Not just George Monbiot either. The claim here is that climate change is just absolutely terrible so we’ve got to do everything, anything that might help, right now:
So the target that much of the world is now adopting for climate action – net zero by 2050 – begins to look neither rational nor safe. It’s true that our only hope of avoiding catastrophic climate breakdown is some variety of net zero. What this means is that greenhouse gases are reduced through a combination of decarbonising the economy and drawing down carbon dioxide that’s already in the atmosphere. It’s too late to hit the temperature targets in the Paris agreement without doing both. But there are two issues: speed and integrity. Many of the promises seem designed to be broken.
At its worst, net zero by 2050 is a device for shunting responsibility across both time and space. Those in power today seek to pass their liabilities to those in power tomorrow. Every industry seeks to pass the buck to another industry. Who is this magical someone else who will suck up their greenhouse gases?
We have our doubts about that insistence upon right now. For we’ve observed that the target - 3oC, 2.5, 2, 1.5 - seems to get lower every time that capitalism and free markets, suitably incentivised, seem to be getting to grips with the claimed problem. We have more than a sneaking suspicion that the increasingly shrill screaming is more about abolishing capitalism and markets than it is anything else. If it turns out that - just to give an example - the experiments on making synthetic avgas out of cheap electricty in the Abu Dhabi desert do in fact work and thus make flying carbon neutral then some other excuse for curbing air travel will be found. So too with a collection of such processes leading to 1.5 oC being happily and easily met - the claim will then move to 1oC being so terribly dangerous so we must still institute global socialism right now.
But those are doubts. We do have a proper test here though. There is an available technology that would reduce atmospheric CO2 concentrations - iron fertilisation of the oceans. We know this is a natural process, wind blown sand from the Sahara does this regularly in the Atlantic. It’s possible to increase the area this happens in thereby sucking perhaps 1 billion tonnes a year out. The end result is more fish plus another layer of rock. The raw material is ferrous sulphate, so cheap that you’d probably be paid for carrying it away. A few thousand tonnes is all that’s needed, out of vast stockpiles available. Distribution is, quite literally, sending a ship or two out with a stoker shovelling it over the side.
True, a billion tonnes of CO2 isn’t a total solution - it’s about two Britains - but then nothing is a total solution. Any one thing only helps a bit, many things to be done to solve it all in aggregate.
So, people who were serious about we must do everything right now would be shouting that we must do this. In reality the environmental movement has made it somewhere near bureaucratically near impossible and legally impossible to even conduct further experiments, let alone deploy the technology.
A few years back we did go and talk to the people who did the last set of proper scientific experiments (no, not the guy making claims about salmon off British Columbia) and they indicated that yes, it works, it’s cheap (perhaps $1 per tonne CO2 permanently locked into rock) but there’s no legitimate manner of getting even permission for that further experimentation.
Which gives us our test. Anyone demanding that everything be done now, right now, should be demanding at least further experimentation with iron fertilisation of the oceans. If they’re not then they’re not being serious in their demand, are they?