So, £20 billion seems to be the cost of current energy policy then
That combination of the price cap - a ludicrous idea - plus no fracking and the dash for renewables seems to have caused a £20 billion cost:
Energy bills could treble unless the Government sets up a £20bn fund to help companies spread out the cost of soaring global gas prices, ministers were warned on Monday.
That idea of the government setting up a fund to pay that bill - spreading it over all taxpayers - doesn’t decrease the cost of the policy mess of course.
In fact, it would increase it. If people were facing higher costs for their energy consumption - absent the price cap - then they’d reduce their energy consumption making the cost lower.
Ministers are under growing pressure to protect households from soaring energy costs as they face the threat of their bills doubling in a year.
It’s not possible to protect households from that cost. There’s only us 65 million folk here to pay the bills. We can indeed pay through the tax system, or out of pocket, but that cost is going to fall on the 65 million of us whatever anyone does.
We would insist that this should all be visible through those bills. If wholesale prices have risen then so too retail. Because that’s the way for us all to see the costs of those decisions that have been made about the energy system. Who knows, we might even disagree about that policy or those policies. You know, when being up front and in our faces fully informed?
The universe really does throw costs at us and while it’s possible for governments to make those costs higher just shifting who pays for them doesn’t lower them. One of those advantages of actually free markets being that we find out, plainly, how much the fashions of those who govern cost us. To the point that we might even disagree about going along with the latest fad.
Amazingly, we don't believe Christian Aid about climate change damages here
We’re entirely happy to specify that if climate change is happening then there will be damages from climate change happening. Even, that if the process is getting worse then so will the damages. However, we don’t think that excuses this tosh from Christian Aid:
The 10 most expensive weather disasters this year caused more than $170bn in damage, $20bn more than in 2020, a British aid group has found.
Christian Aid said the upward trend reflects the effects of manmade climate change and added that the 10 disasters in question also killed at least 1,075 people and displaced 1.3 million.
Each year, the aid group calculates the cost of weather incidents like flooding, fires and heatwaves according to insurance claims. In 2020, it found the world’s 10 costliest weather disasters caused $150bn in damage, making this year’s total an increase of 13%.
Weather disasters, well, yes. The big thing in climate change research is, well, where are all those super-storms? No, really, significant work is going on try to explain why those predicted aren’t arriving in the numbers predicted.
We might also use those super-sekkret insights available to us from economics. The first of those being that they’re measuring insured losses. Insurance being a luxury, or superior, good. Richer societies devote more of their total income to insurance that is - the peace of mind being something that folks buy more of as the daily grind of finding three squares becomes less of a task.
Economic growth in 2021 has been substantial.
We might also want to add in inflation - if we’re talking about the US we could peg that at 6% or so, which is a substantial fraction of that claimed 13% rise, isn’t it?
We might even go further. The damage from such storms is largely to property, property largely being the thing that is insured too. US house prices have risen 16% of this past year. That is, if there were exactly the same US housing stock, facing exactly the same weather damage, at the recorded price change, we’ve already explained more than Christian Aid’s climate change related increase in damages.
Of course, we can’t add together rising house prices and also GDP and also inflation and also the luxury nature of insurance because that’s counting inflation at least twice and possibly more. But it is entirely possible to say that those features alone more than cover that 13% rise in insured damages. For Christian Aid hasn’t accounted for inflation or any of those others even once.
We’d also like to complain about this practice of pushing out the press release - which is why it’s in the newspapers - without releasing the actual report so that it can be checked.
We’re absolutely delighted to discuss climate change, what we should be doing about it and all that. But even the dangers of that dread event don’t excuse this total tripe that Christian Aid is trying to ladle onto our plates. Measuring insured damages without correcting for inflation, nominal values of assets, GDP growth and the very nature of insurance itself simply isn’t good enough. This gets a ”Grade F. See me after class”.
If only Will Hutton were able to make the necessary logical leap here
Will Hutton tells us that neoliberalism - capitalism and markets - is terrible, no good, horrible, because self-interest. And he then divines the truth of human nature:
On the other hand, are the “we firsts”. They are equally passionate in their insistence that salvation lies in the group and society and convinced, whether on the climate emergency, hi-tech monopolies, crippling uncertainties about living standards or just the evident truth that we humans are altruists as much as individualists, that to follow the “me firsts” is the road to perdition. What is crucial to us as social beings is the group, society, the commonweal and belonging as equals. After all, it was associating in groups that was fundamental to our evolutionary capacity to hunt and to see off predators. That primeval urge to associate in the group is what underpins happiness and wellbeing. What people want is less the exercise of choice in markets, more to control their lives in the service of what they value – and that is best done collectively and, as far as possible, equitably.
The logical leap Hutton fails to make is that yes, that is indeed that human nature. We are a cooperating species, working in groups. That’s what makes neoliberalism - capitalism and markets - work. That’s what capitalism and markets are, people cooperating with each other. Exxon is 100,000 people cooperating to bring us fossil fuels. Amazon is a million people cooperating the heck out of each other to bring us speedy tchotchke. The whole system works precisely because humans do cooperate with each other. A transaction is exactly that cooperation, competition is merely the choice of who to cooperate with.
Neoliberalism being - that globalised version of capitalism and markets - the apposite socioeconomic structure for our species precisely because we are a cooperating one.
It’s also worth pointing out that if Will Hutton were to truly believe his own rhetoric there then he’d have to conclude that we need fewer Will Huttons telling us all what to do. For as that we first species we’d already be cooperating, wouldn’t we? As, indeed, we do.
We really shouldn't be taxing companies at all
Current political philosophy is that companies should be taxed and then given tax breaks on things that politicians would like companies to do. This makes sense to politicians. A better suggestion might well be just not to tax corporates in the first place.
There exists a large set of well-identified studies demonstrating that targeted R&D tax policies – such as R&D tax credits, deduction possibilities or subsidies – indeed increase firms’ R&D activities
Tax something, you get less of it. Tax privilege something you get more of it. This is not a great surprise. But now comes the next question:
In contrast to this large literature, little is known about the possible disincentive effects of general profit taxes, which – unlike R&D tax credits – are in place in almost every country. From a theoretical perspective, general profit taxes should have sizeable disincentive effects on innovative activity, as higher taxes reduce the after-tax returns on investment. Due to differences in deduction possibilities, this is particularly true when investments are financed via equity rather than debt – which frequently applies to R&D projects because investments carry high risks and lack collateral.
The answer is yes. So, logically, the thing to do is not to tax corporations in order to increase the amount of R&D that is done.
Politicians won’t like this because it would lessen their power over what sort of R&D gets done. Taxing then privileging does direct, of course, to be able to direct is power and why does anyone go into politics if not for power?
Which is exactly why the rest of us should like the idea of not taxing corporations of course.
Just a little note on that boy child thing
We note that there’s a complaint about how male focused health care is. Women are simply ignored:
Finally the UK has noticed its rampant sexism in healthcare. What now?
Analysis: acknowledging the shocking female health gap is only a first step – ministers must put money into reversing it
The 50% of men who die with prostate cancer (note, with, not of) might observe the funding concerning breast cancer and emit a little hollow laugh at that.
In many countries men face greater health risks, but not in the UK. A study from Manual, a wellbeing platform for men, has found the UK has the largest female health gap among G20 countries and the 12th largest globally.
Now that is an interesting finding given that the largest gaps against females are found in those places with the greatest equality - the Scandis and Holland. It’s even possible that what is being measured isn’t what they think is being measured.
We’d also suggest that there’s a pretty simple explanation for this:
The inequalities start well before women make it to their doctor’s surgery. Women are routinely underrepresented in clinical trials,
Before the routine use of chemical contraceptives no one really did want to do medical experiments on a woman who was, or might be, pregnant. Which was any woman of fertile age in a sexual relationship. Thalidomide showed the dangers of that. Today the answer might be considered more sexist but still true for all that. “Scientists, would you like to try your new medicaments on a population with wild hormonal swings?” And we think we know the answer “Umm, thanks, we’ll do it on the others first, get to that later. Please.”
It’s even true that drug trials are conducted on volunteers and we’re aware that young men tend to be happy with taking more risk than any other group of the species.
But really irks our bile is that argument about the production of children itself - apposite given the day. Historically women lived shorter (peacetime at least) lives than men simply because of the risks of childbirth. Survive those and as now, lifespans for women were longer but that survival was a risky bet. Death in childbirth is now a rounding error in the mortality statistics - even if they did put Semmelweis in a lunatic asylum for pointing out how to make it so.
And, finally, we get to that point that women do indeed live longer lives than men.
But gender inequality in healthcare runs deep. Recognising, as the government has today, that system-wide changes are needed to tackle “decades of gender health inequality” is a vital first step yet, as Criado-Perez has said, women have been considered less important in healthcare as far back as Ancient Greece.
At which point, sorry, but we disagree with the entire premise here. But then what’s that got to do with the validity of a political campaign, eh?
Bless, Owen Jones has only just noticed
We’re not quite sure whether to applaud here - Owen Jones has noted reality - or hiss given how long it’s taken him.
Public support for lockdown measures is disintegrating - a new approach is needed
Owen Jones
Well, yes. This is, of course, the basis of the Swedish approach. Us folks out here will only put up with restrictions on how we wish to live our lives for so long. So, limit such restrictions to when they are absolutely and wholly necessary. For use of them on the precautionary principle, just in case, will exhaust that willingness and we might in fact really, really, need it at some point.
This must be why so few examinations of how Sweden has done through all of this are performed.
But the point is rather larger and we do wonder whether Jones will be able to recognise the logical connection. It is possible to get the Stakhanovites to storm the workfront - when there is a real emergency. What doesn’t work is that constant exhortation for the greater good at personal cost over time. Effort slacks off. That’s just the way humans work.
Therefore economic systems, entire societies, have to be based for the long term on personal incentives, not that more ephemeral gain to the general good. Again, this is just how humans work, we’ll all put our backs into it for no personal gain when we can see and feel the emergency. In more normal times we’ll all worry more about our own thumbs than the lives of a million Chinese - as the man, approximately, said.
Days, weeks, of constant effort to shore up the dyke, rescue the children from the earthquake rubble? Sure - a decades long struggle to build socialism? Doesn’t work.
Because we’re optimists we’ll hope that Owen Jones is able to make the connection - but it does require that significant optimism.
Costs don't go away you know
The collapse of Bulb Energy - largely through not disposing of wholesale price risk to the speculators in The City - is leading to government carrying some rather large costs:
The cost to the taxpayer of running Bulb, the failed energy supplier, could spiral by £1 billion or more as gas prices hit fresh record highs, according to industry estimates.
The point we want to insist upon being that those costs don’t go away simply because someone else - in this case government - owns it. The idiot price cap means that the gap between wholesale and retail prices is there. Someone, somewhere, has to carry those costs.
This principle is of wider application too. George Monbiot was earlier this week wittering about free health care. The NHS isn’t free, it surged through a cost of £150 billion a year some time ago. UK health care is free at the point of use but someone is still carrying that cost.
The Resolution Foundation is today complaining about how social rents are going to rise with inflation. OK, someone, somewhere, is going to carry the costs of housing 5.5 million people. That we might be talking more of opportunity costs - the rent that could be collected rather than the direct cost of housing provision - doesn’t change matters. If we’re not including opportunity costs then whatever it is we might be talking about it’s not economics. Someone, somewhere, is carrying that cost of providing that housing.
We do not solve cost problems by changing the ownership of something. Dumping something on government does not change those costs. We can - and sometimes most certainly should - change whose wallet lightens to cover certain costs but that switch doesn’t change the amount of those costs.
It’s an important point and given current conversations worth recalling. Costs are costs and changing who pays them is not the same thing, at all, as changing the costs themselves. That second is rather more difficult in fact and isn’t something that - unless we desire to increase them often enough - is achieved by nationalising something. As Bulb is showing. That price mismatch between unhedged wholesale and capped retail costs is still there whoever owns or runs the organisation.
This sounds like an excellent idea to us
The usual suspects are complaining and yet:
In a joint letter to the foreign secretary, the group criticises the rebranding of the UK’s development investment arm, which will see the Commonwealth Development Corporation (CDC) become British International Investment (BII) next year.
“This new strategy and name change appears to repurpose BII as an institution that focuses solely on private-sector investment and profit-making, rather than development goals and poverty reduction,” write the 12 organisations, including Global Justice Now, the Trades Union Congress (TUC), the Catholic Agency for Overseas Development (Cafod) and Unison.
The last 40 years has seen the greatest reduction in human poverty in the entire history of our species. The cause has been the spread of capitalism and markets across the economies of the globe. Globalised neoliberalism that is. So, we wish to attack poverty - which we do - then we should have more of that. Up with this sort of thing say we.
We would agree with some of the critiques of that system, refute others and disagree with yet more. But we do insist that the one thing the system does, provably, is reduce human poverty. In a manner and with a level of effectiveness that no other system of socioeconomic organisation does achieve.
It’s possible to shorten the argument, Global Justice Now is against it so we’re for it.
Private-sector investment, the pursuit of profit, these are poverty reduction. Not just poverty reducing, they are the very process itself. More please.
Ideological blindness is a terrible thing
Sonia Sodha, in The Observer, wants us all to know that the NHS really isn’t the national religion, that’s just a cheap jibe from Nigel Lawson. We may puff our chests in pride about it, fail to think rationally, but it’s not a religion, oh no.
She also tells us this:
The real story is this. Until 2010, the NHS had historically been given real-terms funding increases of 4% a year on average: not a sign of inefficiency, but of the fact that countries spend more on healthcare as they get richer, cutting-edge health technologies become more expensive over time, and ageing societies have more people who need more healthcare. However, over the past decade, the NHS has received the tightest funding settlement in its history, way below this average.
Health care is indeed a luxury good - meaning that richer folks spend more of their income on it, not that it’s a luxury only for the rich - but rational, rather than religious, observation also brings us to Baumol. Services become more expensive relative to manufactures as a society becomes richer. Because it’s much more difficult to increase labour productivity in services as labour becomes more expensive - labour becoming more expensive being a synonym for a place becoming richer.
This is true but the important thing is what do we do about it? Well, the way to improve productivity is more markets and more competition. This is a known economic result, it’s not some mystique being sprinkled across the debate by neoliberals or anything. Competition raises productivity over time. So, if we’re finding it hard to raise productivity in health care - we are - then we need more competition in the provision of health care. This is not less so because Baumol, or luxury goods, but more so.
But the NHS is indeed that religion, not something to be discussed rationally. A useful proof of that contention being this from Ms. Sodha:
Long-term data show just how efficient the NHS is. We spend significantly less per person than comparable countries such as Germany, France, Switzerland and Sweden. We have far fewer hospital beds a head, way below Germany, France and Austria, and fewer doctors and nurses a head than the OECD average.
Her own link to the evidence takes us to this:
Health and long-term care spending are above average, though hospital beds and the number of doctors and nurses are slightly below the OECD average
Spending more and getting less is known as inefficiency, non-efficiency, not as is claimed, efficiency.
But then that’s a mark of religious belief, isn’t it? Facts and reality have to be ignored, or at least twisted, to fit the extant belief system rather than theories adjusted to fit the universe.
These claims of NHS efficiency are as those American Bible parks where Adam and Eve pet dinosaurs. After all, we know absolutely the Earth was created on Oct 23, 4004 BC. Reality has to fit around that, obviously. To argue with Holy Writ is to be a heretic.
Imagine a world where the climate models are better than the covid ones
As we all know economists only make predictions to prove they’ve got a sense of humour. There is though one thing that economists do in fact get right about their models - probability.
Fraser Nelson over at the Spectator finds that the covid modellers at Sage haven’t grasped this. Those Sage models and results are not adjusted for the probability of outcome, they are instead simply the results from extreme ends of the spectrum of possible outcomes.
We do see exactly the same thing in much of the hyperventilating about climate change. Results from the RCP 8.5 model (A1 FI in the earlier SRES) are what drive all those tales of imminent droughts, London underwater (at the same time too) and the immediate turning of the Earth into Venus. They’re also wrong, in that we know that RCP 8.5 isn’t going to happen and never really was either.
However, we also see folks getting this right even in climate change. Back some years James Hansen decided to model what the carbon tax should be and came up with $1,000 a tonne CO2-e. Immediately folks pointed out that this was not true. His calculation was that if everything went wrong, economic growth was slow, globalisation retreated, we didn’t frack and so turned back to coal as our prime energy source, there were significant positive feedbacks we don’t know about, then maybe and possibly the correct carbon tax could be as much as $1,000 a tonne. The if and the could being very important qualifiers there.
When we include probability - what is the probability of each of the socioeconomic scenarios which drive emissions estimates - then we come back to our more usual range of what that carbon tax should be. As with all other such investigations, ranging from a negative tax - a subsidy to the glories of fossil fuels which make us richer - through to that extreme at the other end, the $1,000. Multiply each outcome by the probability, average out and we get the range we actually use for decision making, somewhere in the $30 to $100 range. As shown by the economists, Nordhaus and Stern.
The estimate must be the averaging of the outcome times the probability. This economists know. This at least some of the discussion about climate change acknowledges. This Sage and covid are entirely ignoring.
Which is why covid modelling is doing such a sterling job in making even economic and climate change estimates look good.
Something of a pity that this basic truth about modelling and prediction is being ignored in the one of the three that requires immediate and significant decision making, isn‘t it?