If only Polly Toynbee understood matters

At least half an excuse for getting that fatted calf backing up away from the bludgeon:

Here’s one action that will be necessary: carbon taxes. Writing in the Financial Times, the economist Tim Harford recently suggested that every product needs a carbon price attached, sending a signal not just to the buyer, but right down every supply chain to use less energy in growing, manufacturing and transporting a product to attract less tax.

This is hardly a new idea and it’s not unique to Tim Harford. Bill Nordhaus gained his Nobel for pointing it out, Nick Stern his peerage. For that is the lesson of the Stern Review. If we accept - whether you do or not is entirely up to you - the basic idea that climate change is a problem we should do something about then the thing we should do is a carbon tax at the social cost of carbon.

Much as it will shock Polly this being something we here have been saying for decades. Get on with it in fact.

That will be necessary. But any climate-abating tax brings on green crocodile tears for poor people, often from the same Tory MPs who just voted to remove the £20 universal credit uplift. The claim that carbon taxes would disproportionately affect the poorest people was what killed off the fuel price escalator – a yearly tax increase devised by the Tories in 1993 to discourage driving – after owner-driver hauliers blockaded oil refineries in 2000. When the climate demands that fuel taxes rise, politicians make them fall.

That being where Polly is failing to grasp the important point. A carbon tax does not mean “tax carbon ever more”. It means “tax carbon this much and no more”.

Back a decade and a bit the fuel duty escalator was too high as a tax upon those emissions. As we pointed out once upon a time (now sadly lost to the ether, sorry) that hike in fuel duty that Ken Clarke started “to meet our Rio commitments” was 11 pence a litre too high when compared with the social cost of carbon.

The correct solution to climate change thus requiring lower fuel duty, not higher. Of course, this being politics no actual cut was made. Instead, not raising the tax again and allowing inflation to degrade the value of it reaches the same end point.

The IMF just proved this for us too. On page 18 here. UK petrol and diesel is near exactly properly taxed to take account of the expenses of emissions, local air pollution, accidents, congestion and the existence or not of VAT.

Just for the hard of understanding - or hearing perhaps - Pigou Taxes mean the right amount of taxation, not more.

If only there were some system of deciding what to do here

We’re told that lots of something that people use is in lots of things that people use:

About 7% of the world’s gold supplies are trapped inside existing electronic devices, meaning that, according to some estimates, by 2080 the largest metal reserves will not be underground but in circulation as existing products. What’s more, one tonne of extracted gold ore yields 3g of gold, whereas recycling one tonne of mobile phones yields 300g. So waste dumps and landfill sites are the new resource-rich mines.

Gold could be lying around in some mountain somewhere or it could be in some handy or TV that people like to use. We think we’re just fine with the idea that some portion of it is in use rather than lying around in some mountain.

We’d also note that it’s not actually unusual for some large portion of available metal to be in use somewhere. AT&T spent much of the 1970s paranoid that someone would realise that their telephone network was the world’s largest store of refined - and increasingly valuable - copper.

But it’s clear that folk are shocked by this. Or at least worried about that value that might be missed at the end of useful life of the electronics. If only we could devise some system that could sort this out for us. Aid in deciding what to do with that waste even.

Which, of course, we have. That combination of human greed - sorry, enlightened self interest - and the price system. When gold is profitable to extract from waste electronics then gold will be extracted from waste electronics. That lust for lucre will see to that.

That is, assuming that those facts on offer are true (not something we’d wholly agree with, gold plating in modern electronics is much thinner than the old stuff these numbers are derived from) then we’ve already the decision making process in place. The political and societal task then becomes being wise enough to leave it be and allow it to work to its conclusion.

In honour of this week's screaming match about the environment

COP26 is going to lead to an awful lot of insistences that we’re all gonna die, right now, unless we - well, unless we do whatever it is that the person screaming demands. Kill the use of fossil fuels, send $100 billion a year to the despots of poor countries, stop eating red meat, return to the life patterns of medieval peasantry and so on.

We’ve also been told this a number of times before, memory isn’t what it once was but we’d start with an estimate of at least 25 times so far, given that that appears to be how many COPs there have been.

At which point a small examination of another warning of environmental disaster. This comes from the New Scientist of 2007 and has been added to varied school curricula along the way. It’s not just some passing error. George Monbiot, just to name one, was using it as a reference to bolster his argument.

…both indium and hafnium – which is increasingly important in computer chips – could be gone by 2017, and terbium – used to make the green phosphors in fluorescent light bulbs – could run out before 2012.

Indium did not run out in 2017, terbium is still available despite that posited end date of 2013 and the idea that hafnium will ever run out at anything like current consumption volumes is a gross absurdity.

The thing about science is that when an hypothesis meets reality it’s reality that wins, not the idea. The process of science is to examine hypotheses (yes, we know hypothethi is wrong but rather fancy it all the same) and, where reality does disagree with them, change the idea so that it does accord with the facts the universe is presenting to us.

What went wrong here is explained in full in this (free) book. The short answer being that those who made the prediction had no knowledge of metals, minerals, mineral reserves, mineral resources, extraction techniques or even the definitions of most of them. All certain handicaps to trying to measure the availability of metals, minerals, the relationship between them and reserves, resources and so on.

We do not say that every assertion made this week in Glasgow will be as idiotic as our example here. But every one does need to be subjected to the same scepticism. For that is actually the scientific method, that assertions are tested against reality and it is always reality that wins.

There are times when we just don't believe what people try to tell us

We agree that we might be wrong to do so but still:

Johan Rockström, the director of the Potsdam Institute for Climate Impact Research and one of the world’s foremost climate scientists, warned that the 1.5C target was not like other political negotiations, which can be haggled over or compromised on.

“A rise of 1.5C is not an arbitrary number, it is not a political number. It is a planetary boundary,” he told the Guardian in an interview. “Every fraction of a degree more is dangerous.”

We get the very definite impression that some people are using climate change as an excuse rather than a reason. It used to be, for example, that we were all told that 2 degrees was the limit. Only when it became obvious that a capitalist, globalised, free market system could meet that 2 degree target did we start to get the shouting that actually, 1.5 was necessary. For there are those who want to insist that it is the overthrow of capitalism - and markets, globalisation - that must be done.

As George Monbiot says in the same edition of the same newspaper:

Capitalism is killing the planet – it’s time to stop buying into our own destruction

The base understanding is in error. The assumption is being made that capitalism demands growth. Which isn’t the point at all. Humans desire growth in the economy - who doesn’t like being richer? - and capitalism is a good way to get it.

But it’s also wrong in another manner. As the basic economic assumptions behind all the predictions of climate change say (the SRES models) continued economic growth is entirely consistent with the continued health of the planet and also with beating climate change. What’s worse for the argument that capitalism is to blame is that those models with globalised free market capitalism do this better, Horrendous results stem from having a regionalised, non-market, socialised economy (the B2 model).

The reason being that very lust for profit directed by that capitalist and market system. It encourages efficiency, it encourages the use of fewer inputs to gain any specific output. Given that the ecological constraint is those inputs (defining the disposal of wastes correctly as an input as well) then for any given standard of living a capitalist and market system will use fewer inputs. Equally, for any possible set of input limitations a capitalist and market based system will provide a higher standard of living.

We can’t help but think that at least some of what we’re being told here just isn’t true. On the basis that at least some are using climate change as the excuse for their desired socioeconomic system rather than as a rational analysis of the problem or even a reason for a specific response.

This is no doubt cynical of us but then as we’ve said before the only correct question in politics is “Am I being cynical enough?”

Just a little more proportional representation and we could have perfect government

King Log does appeal:

Government formation talks in the Netherlands have become the longest on record, 226 days after the 17 March elections delivered a fractured political landscape that made parties more reluctant than ever to compromise.

Dutch government coalitions often take months to form, but this year’s post-election talks have been especially drawn out. For months, parties failed to even move beyond the question of who would be allowed at the negotiation table.

If that proportional representation system could be tweaked just a little more then the negotiations could stretch out until the time of the next election. Perfection, no government could ever actually do anything.

The problem with that being that the aim of democracy is to be able to change who is in power. Without elections changing governments we end up with that permanent state of the bureaucracy, just below the politicians, in charge of everything, forever.

This is one of those problems to which there is no solution, just a series of increasingly - or decreasingly - attractive trade offs. Yes, we grasp the arguments that more PR provides ever greater refinement, granularity, to democratic representation. We also, as here, understand that at a certain level of such PR then an actual change in governance becomes near impossible. The very point of elections being to be able to have a change in governance.

The decision is where to be on the spectrum, elections that are truly representative of all opinion and elections that actually perform a useful function.

It's as if no one bothers to cross check the numbers

Aditya Chakrabortty tells us, in The Guardian, that the state has been permanently hollowed out by the rigours of austerity:

The basic message of today – the most significant in British policymaking this parliament, setting out the shape of the state and budgets for Whitehall departments for years to come – is that the Tories have now called off their decade-long austerity programme, but they will never reverse it. Beyond the NHS, huge swaths of the public realm are now permanently shrunken.

On the same day The Times tells us that:

Rishi Sunak claimed that the Conservatives are the “real party of public services” as he announced a budget yesterday in which government spending will rise to its highest sustained level since before Margaret Thatcher.

And:

The Office for Budget Responsibility (OBR) said that the overall tax burden would be at its highest level since Clement Attlee’s postwar Labour government of 1945-51 and spending at its highest level since the 1970s.

One of those two claims about the size of the state must be wrong. It being that of Mr. Chakrabortty which is so, of course. There has been some movement around of how much is spent upon which thing, that’s true, but then that’s a necessary process even within a rising budget in order to avoid running out of other peoples’ money.

Modern theories about government borrowing are just so difficult to understand

Two Guardian pieces which seem to be taking entirely opposite sides of the same point. We suppose we could take that as a welcome diversity of opinion over there but that’s not how they’re presenting it:

Lower income countries spend five times more on debt than coping with the impact of climate change and reducing carbon emissions, according to a leading anti poverty charity.

Figures from Jubilee Debt Campaign show that 34 of the world’s poorest countries are spending $29.4bn (£21.4bn) on debt payments a year compared with $5.4bn (£3.9bn) on measures to reduce the impact of the climate emergency.

If poor countries borrow then this leaves them with an horrendous debt burden that they struggle to service:

In his budget, Rishi Sunak will say the UK needs to cut spending. Don’t believe him

Yes, public debt is high, but the way to bring it down is to invest – starting with the government’s social and climate pledges

If we borrow then it creates the income stream - and more - to service that debt burden.

This is the opposite claim of that first. It’s possible to finesse it into coherence by insisting that we will spend the money sensibly - Hah! - and they do not. But that then calls into question the sense of sending more to those poor countries whether as loans or grants. Why send money to where it will be wasted on things that don’t produce a return? No, we don’t mean some mere financial return to lenders, we mean that sending money to where it produces less value than the starting point is to make us all poorer.

So, there’s the interesting question. Why is it that poor places borrowing leads to unsustainable debt burdens but rich places borrowing leads to paying off the debt?

Our assumption is that it’s just politically convenient - it’s Thursday, isn’t it? - to so insist but perhaps someone can come up with a better piece of argumentation than that.

They're right you know, people will pay more for high animal welfare standards

The National Farmers Union and others argue that we British not only will but positively gasp over the opportunity to pay more for our food if that means higher animal welfare standards. Thus imports of meats produced to lower standards should be banned - no free trade for you!

He said: “People have got more into provenance and wanting to know where their food comes from. The food scares of the late Eighties, early Nineties like mad cow disease and foot and mouth really woke people up in this country to thinking about what they’re eating. And now people are willing to pay a little bit more for good food. People think ‘I can go to Tesco and buy a chicken for £2.50’ and ask why a shop like mine is selling them for £12.

“Well, if you want a free-range chicken, it’s taken two-to-three times as long to rear it and it’s been fed properly and housed properly and that costs money. We find that people maybe eat a little bit less but they want to eat a little bit better and they are willing to pay for it. You’d go to a shop and buy a top-quality suit because you’re going to a wedding, so why not buy top-quality food when you want something really special or if you value your health.”

The truth being that some people are making very good livings meeting those demands for high standards. But, equally clearly, this is a niche taste, niche suppliers for niche markets.

This being the argument for free markets of course, free of import restrictions and bans. For only when the market is indeed free can each niche be served, the different utilities maximised. Those who actively desire the high standards can currently gain them at their relevant cost. This ability will not disappear with freedom. But with that liberty so also will those worried more about the monetary cost than anything else gain their desires.

That is, it’s the very fact that some Britons desire those high standards, others either do not or don’t particularly, which means we should be having that free trade. Because only when the consumer can make a choice are they both free and also at liberty to maximise their own utility.

After all, those who want to pay £12 for a chicken can. But why should those who prefer £2.50 have to?

Markets may take their time but they do work

Part - part - of the idea of asking students to pay for their own degrees was that students would then choose degrees which are worth it to them. It is, if you like, akin to a Pigou Tax. There’s a cost to these things and only if those gaining the benefit are also paying the cost will we have the correct amount of the right type of degrees being taken by the people who will benefit from them.

Thousands of academics from across the UK and abroad have signed an open letter calling on Goldsmiths, University of London, to “halt the decimation” of its English and History departments, after the university became the latest institution to announce job cuts in the humanities.

Goldsmiths has announced 52 compulsory redundancies to tackle “significant financial challenges”, targeting English and History as well as administrative staff. The letter, which currently has more than 2,600 signatures, warns that academics with “deeply rooted” expertise in Black and Queer History and Black literature are among those under threat of redundancy. It accuses university managers of running higher education like “fast fashion” and showing “utter disregard for the integrity of the education they want to sell”.

Well, yes, the point about selling things being that you do better selling what it is that the customers wish to buy:

While applications for subjects such as computer science and maths have been booming, applications to study English have slumped, putting the subject in jeopardy at many institutions.

There are those who value a degree in English. There are those who value one in a STEM subject. By exposing those who take such degrees to the cost of them then we sort through those who do in fact value the thing at at least the cost of its provision.

This is not some aberration of the imposition of student fees, this is the point. Markets work, as with the law they grind small even if they can be a little slow.

Not the way to bet

Boris’s central economic policies are “levelling up“ and “green jobs”, the latter falling out of his ambitions for COP26. Unfortunately they run up against the obstinate truth that since WW2, it has never been wrong to bet against UK manufacturing. As we all know, this has been bad news for the individuals and regions once relying on it. Thus, the relative immiseration of Britain’s north and midlands, not to say the formerly-industrial working-class in general.

Nothing works. In the mid-sixties, Kaldor’s Selective Employment Tax failed to give manufacturing the intended leg-up. For a generation after 1963, the Location of Office Bureau pushed only back and middle-office employment out of London - and often no further than smaller towns in the southeast. Apprenticeships suffer from vanishing repute among middle-class or aspirational parents (would you want your child to have one?) and the blind-eye regulation of provincial banks under Blair and Brown, hoped to bring high-quality service jobs out of London, led the outfits concerned to spearhead Britain’s part in the financial collapse of 2008.

So is it hopeless? Almost certainly so, at least within the timescale of an electoral, business or reproductive cycle. Taking this last first: from a personal point of view, it is a longer-shot gamble than ever, for ambitious parents to bring up their kids as a bet against London, or at least the southeast.

As to public policy, officials are confined to:

- Palliative care, e.g. further rusticating government back-offices; and in the case of Channel Four and BBC News, risking the resilience of business models under threat from new media;

- Artless plans to create provincial tech hubs around Russell Group Universities, bound to fail as private investment which is value-added, i.e. associated with applicable skills and relationships, will hesitate to make excursions beyond the proposed Oxford-Cambridge tech corridor - if it ever happens;

- Gestures, e.g. HS2 if it ever happens. Ballooning costs make the railway unlikely to be extended. This means it is destined to frustrate its promoters’ intentions, by making Birmingham further subaltern to London, rather than goosing up the torpid city-regions of Yorkshire and Lancashire.

This is the context for Boris’s economic policies. He is a natural booster and we have to assume that his heart is in it. After all, he famously claimed to be “Brexitty Hezza”, invoking the great Tory interventionist and troublemaker; we may take it that he is not deaf to pillow-talk, and it may help with the kids who hate him but love greenery.

Unfortunately, nothing in 250 years of modern British economic history suggests that government has a contribution to make in such circumstances. Any money spent on the “levelling up” will be public funds, acceptable only by companies either in extremis or for the most cynical of reasons, e.g. to horde labour. As ever, truly promising businesses will seek out and be able to attract value-added money.

This takes us back to COP26 and the “green jobs” underpinning Boris’s net zero commitments. They suffer from similar problems for him: those with any gumption will see state money as the mark of Cain. In addition, the underlying policy relies upon immature technologies, where the bet is that learning-curve effects will tweak the physics and make the economics come good. If so, any profit-maximising promoter of fruitful developments will be looking for manufacturing facilities which are either overseas or labour-light. The private sector will be more suspicious than ever of government money, for fear that the price will be domestic production that is more labour intensive than industrially sensible.

Boris has made a political gamble, no surprise as he is a gambler. But his climate gamble is far riskier than Blair’s original commitments. These piggy-backed on Britain’s coincident move from coal to gas in power generation, guaranteeing that we could meet Blair’s carbon reduction targets. Boris is making bets of his own: that the tide of opinion will continue to flow green, that a enough unproved technology platforms deliver to keep the lights on and that a British government can do something it has never done: supervise an industrial paradigm shift. It’s not the way to bet.