History is a set of mistakes to avoid, not examples of stupidity to repeat

The worst of the varied attempts at electricity deregulation is probably California’s. The mistake made was to allow wholesale rates to move without control, while insisting that retail rates be capped. Worse, retail volumes were not, while prices were capped. This was such foolishness that it drove the once mighty Pacific Gas and Electric into one of its bankruptcies.

Consumers in Britain have so far been spared from a surge in their bills because of the energy price cap, although this has had the side effect of triggering a wave of bankruptcies because suppliers were unable to pass higher costs on.

It’s not a side effect, it’s an inevitable consequence.

There is an argument in favour of having generalists in power. They might have a more rounded view of life than the mere economic technocrats can bring to the procedure of governing. This does though require that geographers, classicists - if we are to pick just two from the list of possible courses of study - regard history as what it really is, a list of mistakes not to repeat. Rather than what we’ve had which seems to be the view that we should repeat the stupidities of others.

Seriously, what did anyone think would happen with a price cap at the retail level and free floating wholesale prices?

Fake it 'till you make it

The Elizabeth Holmes trial - we have no problem with that or the verdict - is leading some to crow about the end of “Fake it ‘till you make it” as a guiding ethos in Silicon Valley. Something we insist is a mistake. For every act of entrepreneurship is exactly that. To a markedly less criminal extent of course, but the entire process of getting something new up off the ground is a wizardry of levitation:

Holmes verdict an indictment of Silicon Valley’s ‘fake it till you make it’ ethos

This does not depend upon whether it is the state planning something or the individual get rich quick merchant flying a kite (kiting cheques is where it might stray over into being illegal).

Consider, say, Concorde. It is possible to build supersonic aircraft but does the world want them? As it turned out the outside environment changed - fuel prices mainly - and the answer was no. Or NHS coding, yes, it would be great to have proper electronic records keeping but can we build it? As it happened no, the state couldn’t, £12 billion was spent producing not one usable line of code.

Or in that private sector, perhaps the world does want smartphones, maybe it doesn’t. One that uncertainty Steve Jobs gambled the entirety of Apple. Possibly the world wants Ford Edsels. Ah, no, it didn’t.

The point being that we always do face uncertainty. We simply do not know whether we can produce, newly, something the world wants. Nor, often enough, whether the the world wants something that can be produced. Every act of entrepreneurship is exactly that levitation of the project, over perhaps reasonable measures of risk, to the answers to one or other, possibly both, of those questions.

There are indeed, as there should be, rules and laws and regulations about how far this process can righteously be taken. But fake it ‘till you make it is the entire foundation of what drives society forward. That trying out of ideas that may or may not fit the joint spaces of what is possible and what is wanted.

That someone very much overstepped the mark here and is to be righteously punished for doing so doesn’t disprove the basic strategy. Every new company is the selling of a dream which may or may not work out.

So Nick Stern was right in his Review - we've got to do it the cheap way

Agreed, this is only polling evidence but still:

Soaring energy bills put Britons off paying higher taxes to save the planet

This is a point that the Stern Review addressed in some detail.

Sixty per cent of Britons say that they are not willing to pay higher taxes on their energy bills to help reach the Government’s net zero targets, according to a poll.

That people dislike paying more is not a surprise to anyone who has paid attention to the behaviour of human beings in the past.

But then this is exactly the point that Stern made. Humans do less of more expensive things, more of cheaper. That’s how we derive those lovely demand curves. So, if we do the fighting the climate change the expensive way then we’ll do less fighting climate change. Simply because people - they being humans with this behaviour trait - will do less of the expensive thing. If, on the other hand, we use the cheap ways of addressing the same problem then we’ll do more addressing, fight and deal with more climate change.

This is precisely and exactly the logical walk through that leads to the recommendation for a carbon tax and allow the market to chew through it rather than some plethora of possibly bright ideas from central state planning. Or, as it’s more usually known, government picking losers.

Economic efficiency matters here that is. The more one worries about climate change the more this is so too. Nick Stern should be dancing around the room repeating the Kingsley Amis suggestion to Robert Conquest. That this clear and obvious truth isn’t at the heart of current policy tells us what’s wrong with current policy.

Boris and his Bureaucrats are Bungling Brexit

The referendum promised that the UK would regain sovereignty but continue to trade with the EU much as before – no duties and frictionless trade across borders.  The consequential Trade and Cooperation Agreement (TCA) was received with much rejoicing. Unfortunately, “cooperation” has not extended to minimising regulation and controls at the EU/UK borders nor to maintaining the EU practice of each country retaining the VAT it collects rather than leaving collection to the country of the ultimate buyer.  The former system is much simpler and the swings pretty much offset the roundabouts. 

These two oversights first showed up with the Northern Ireland Protocol. Mr Johnson was persuaded that the UK/EU border along the traditional Northern/Southern Ireland border (border posts) would infringe the Belfast Agreement. This is, and always was, total nonsense as that Agreement goes nowhere near the topic and moving the border to the Irish Sea neither prevents smuggling across the land border nor sectarian issues.  It has probably made the latter worse.  Some, e.g. Sir Bernard Jenkin and other MPs, claim the Protocol is diverting business from Great Britain to Ireland which would be itself enough to justify triggering Article 16 but it is too soon to be sure. 2020 Northern Ireland exports were flat to both.

UK negotiators were so preoccupied with trade with Ireland, north and south, being duty free, that they failed to recognise that imposing the EU’s regulatory regime on the north would, in effect, colonise it. It seems likely that this was a deliberate plan by the EU, some of whose senior officials made no secret of their view that Northern Ireland was the price the UK would have to pay for Brexit. Given that Mrs May had brought UK regulation into conformity with that of the EU in 2021, the excessive zeal applied to customs controls for regulatory, not duty, reasons smacks of ill-will and certainly not the cooperation outlined in the TCA. Brussels has not denied that goods from Great Britain bound for Northern Ireland suffer 2.5 times the number of customs checks borne by Rotterdam’s imports from all the world.

Boris Johnson was foolish to sign it but he was under pressure to Get Brexit Done and in negotiations of this type, the larger player, the EU in this case, always has the advantage.  The fisheries deal was another example of claimed UK victory which was far from it.  In looking at how the UK government snatched defeat from the jaws of victory, we need to focus on the impositions it freely, i.e. without any negotiating pressure to do so, imposed on its own citizens and businesses, as distinct from negotiations it lost. 

High on this list is the new set of customs regulations coming into effect in 2022, starting on 1st January and phased in with two further tranches at three monthly intervals.  It has been reported that one third of UK importers are unprepared and HMRC IT systems are so “medieval” (scholars may be surprised that there were any IT systems then), they will not be able to cope. For example, the main new Commons Library briefing page helpfully says: “The Brexit checker personalises information on HMRC processes for importing, exporting or customs relief” but if you press on the link you get a page saying it is insecure and you must return to the previous page. “Medieval” is about right. 

More modern is the set of “step by step webinars [which] provide an overview of the new rules and border requirements that will be required from January and then July for moving goods from the [following] EU [countries] to Great Britain”:  Belgium, France, Germany, Italy, the Netherlands, Poland, Portugal and Spain. If you want to import from other countries than those and Ireland, you are on your own. Ireland is not affected by these new rules and regulations which raises the question: if they are not needed for Ireland why are they needed for any other EU country? 

These webinars are all very similar.  I sat through most of the Polish one and doubted whether many business people would last as long as I did.  The civil servants presenting were remarkably pleased with themselves but their slides were low-grade and uninformative. 

I will not detail these new regulatory customs requirements in this blog, suffice it to say that they are complex and burdensome. The government’s “overview” runs to 159 pages of small type. The question is not what they are but why the UK government is imposing them at all, along with the costs and delays, on its own citizens and businesses.  Of course, customs arrangements are necessary for imports from third countries but why those from the EU where we have just concluded a TCA eliminating duties?  As a sovereign state, the UK is under no obligation to introduce any of these rules, so why are we? 

So far as VAT is concerned, the UK and EU could simply return to the far simpler EU system with each country collecting from its own citizens and businesses. The new system is unfair: my grandchildren’s German grandmother had to pay German VAT and then UK VAT on top of that when her Christmas presents clear UK customs (if they ever do). 

The main justification given for this UK customs bureaucracy is the need for verification that the goods originated in the EU; otherwise, duty is payable.  This makes sense until you think about how it got into the EU if it did not originate there.  Duty should have been paid then and it should not have to be paid twice. Importers should declare non-EU originated goods arriving via the EU and spot checks would be needed for suspect items but not a whole, huge paper mountain.  And, by the way, all paperwork (or the electronic equivalent) is required twice: once with the goods and a copy one day in advance, one day, not two, please note.  Then we will be paying for the army of clerks comparing the two. That could be computerised but if HMRC specifies the system, it will take too long and cost too much. 

A watered down version of all this was operating in 2021. HMRC requires importers to use agents to assemble the paperwork and ensure it complies with HMRC requirements, so, in theory, all HMRC has to do is to rubber-stamp them. The trouble with that, as the children’s German grandmother discovered is that the agent’s (who had better be nameless) employees were too stupid to understand the requirement or admit their ignorance.  The Christmas presents posted in November have yet to get to HMRC for clearance.  Maybe they never will but she cannot claim on insurance because, technically, they are not lost. One swallow does not make a summer but I have heard of many similar cases. 

The bottom line is that Brexit is being bungled by the UK’s own bureaucrats.  Maybe it is because they never liked Brexit in the first place but more likely it is because they are petty minded and get satisfaction from creating hoops for citizens and businesses to jump through and penalising them when they fail. If eliminating customs duty and VAT on imports from the EU might be expensive, then HM Treasury should publish their arithmetic for expert review.

Isn't the world becoming a better, cleaner, place?

From The Guardian:

It’s an encouraging start to 2022. In an informal census – or perhaps a sort of watery award ceremony – the Wildlife Trusts’ marine review of 2021 has pointed to humpback whales off the north-east coast of Scotland and England, increasing numbers of seal pups being born, and seahorses in protected beds of eel grass off the Dorset coast.

As has been noted, London’s air is now cleaner than it has been since 1306 and that first delivery of sea coal from Newcastle.

Or, the environmental Kuznets curve is a real thing. As Maslow’s Pyramid points out humans have an hierarchy of needs and desires. Full bellies come first, then shelter, clothing and on. It’s only when baser desires are sated that attention turns to other desirables. Like, say, being able to breathe without coughing, or gawping in delight at nature’s wonders.

The implication of which is that the richer a society becomes the cleaner it will be, the more nature it will leave room for. Just because that’s something that folk will spend some increasing part of their greater income upon. Which is true from even a cursory glance at the world around us. A useful proof, is one is required beyond this theoretical observation, is to try sucking in a lungful of air in Dhaka, New Delhi, London or Tokyo.

This is not just trite though, it needs to inform through into policy. If richer people have cleaner environments and we desire a cleaner global environment then we need to make all people richer. That is, the environmental movements’ calls for less economic growth are entirely the wrong answer.

Interesting what a little observation plus knowledge of how humans actually work can lead to, isn’t it?

We spy that cakeism the Prime Minister is so fond of

If we are to avoid the problem of trivial earthshakes from fracking (‘quakes is far too strong a word) and also to have our energy domestically produced we’ve got to put the windmills and the solar panels somewhere:

Countryside campaigners have warned that swathes of rural southern England face being ruined by “massive industrialisation” if plans for one of the country’s largest solar farms are given the go-ahead.

The approval of plans for a large solar power plant in Oxfordshire has sparked fears of a “tidal wave of solar farms” despoiling rural areas.

There are now proposals for another four huge solar farms covering between 160 to 340 acres each, close to the Chiltern Area Of Outstanding Beauty and the north part the Oxford Green Belt.

We have been known to recommend the blowing up of the Town and Country Planning Act 1947 and successors but this idea that building cannot happen even close to the protected areas, let alone in them, is extreme in the other direction.

The point that caught our eye though is this:

The CPRE argues that solar farms should be built on brownfield sites and not in open countryside.

Definitely cakeism, the wanting to have it and also eat it.

For the CPRE also argues that if we continue to stuff the British into the smallest new housing in Europe then we’ve, just about, enough brownfield land to stick the rabbit hutches on. Only very minor amounts - but even so still some - of greenfield land will need to be used to provide such shelter. All of which will be far away from the window views of any CPRE bigwigs which is the point of the objections.

But if those brownfield sites now have to be used for the solar cells then where are the houseless proles to be stocked? Don’t ask the CPRE for as long as it’s far away from those countryside views they’re not worried.

The essential truth here is that if we are to move to an energy provision system that makes extensive use of land - which renewables do - then we’ve got to use more land than we did in the previous, land-light system. As population isn’t going down then that means more land must be brought into housing/industrial use. There simply isn’t enough brownfield land to do both, land hungry energy supply and also house the population in shelter fit for helots let alone heroes.

Make a decision people. One way or the other for you cannot have it all - that’s cakeism.

Stop making laws about it, abruti

There is little we can do here except shake our heads in wonder at the fools just across the Channel. This goes beyond goofy and is accelerating through half-wittedness:

A law banning plastic packaging for large numbers of fruits and vegetables comes into force in France on New Year’s Day, to end what the government has called the “aberration” of overwrapped carrots, apples and bananas, as environmental campaigners and exasperated shoppers urge other countries to do the same.

Emmanuel Macron has called the ban on plastic packaging of fresh produce “a real revolution” and said France was taking the lead globally with its law to gradually phase out all single-use plastics by 2040.

This does, specifically, include cucumbers. Which is something of a problem.

One hand of the argument is that the use of plastic is, by modern mores, evil. So, there’s that of course.

The other hand is that such plastic sleeves prolong the life of a cucumber which is why they’re used. As Morrisons, who actually do such sheathing, point out:

In actual fact, a cucumber has a “best before” life of 3 days – which film can increase almost 5 times over, to 14 days. This is because a cucumber is 96% water, which it begins to lose as soon as it is picked. After 3 days, it has lost so much water that it becomes dull, limp and unsellable. Wrapping it in just 1.5 grammes of plastic film extends its quality dramatically .

Ah. We are in the standard space of life where there’s not actually a solution there’s merely that set of trade offs. Limp cucumbers that are thrown away or firm and long lasting but using plastic. That plastic working as the sildenafil rather than merely the sheath perhaps.

There is no “right” answer as to whether the plastic wrapping should be used or not, it depends upon whether one is trying to save plastic wastage or cucumber wastage.

Except we have the third and gripping hand of our argument. Which is, well, what’s it all about then? This idea of having an economy, a civilisation, the aim is that just ordinary folks have more of what they want. By definition this is making them richer. We can also note that what folks want varies. A system which allows variance will therefore be able to provide more of those folks with more of the varied things they desire to have - variance allows increased richness that is.

At which point the not just silliness but stupidity of laws on the subject become apparent. Some will value the lower food waste costs of sheathed cucumbers. Other will feel righteous for not having wasted 1.5 grammes of dead dinosaur as they throw away that dried husk of cucumer sativus.

Human utility is maximised by allowing producers to vary their practices to meet the varied desires of their consumers. Rather, really, the point of a market economy in fact.

If only French officialdom had a phrase with the meaning of chacun à son goût to hand, or something even approximating it.

This isn't an entirely new observation

That conflict between political visions and actual economics:

What if monetarists are right and German headline inflation - currently at a euro-era high of 6pc - proves stubbornly persistent?

Germany faced this level of inflation during the Reunification boom of the early 1990s. The Bundesbank crushed it by raising rates 500 basis points to 8.75pc, and in the process blasted sterling out of the Exchange Rate Mechanism, with potent political consequences for Britain’s relations with Europe.

This time the ECB is persisting with negative rates even as Germany hits full employment and full capacity, and even as the ECB’s own staff union demands a 5pc pay rise.

The central bank is continuing to soak up eurozone budget deficits with QE bond purchases on a vast scale, essentially shielding a string of insolvent Club Med states from market forces under scarcely-disguised “fiscal dominance”.

Leave aside all of the details here - exclude even Germany, Brexit, the Olive Line and all that from your thoughts. Observe instead that we have a clash here.

There’s a political idea - again, what exactly it is isn’t the point - which says that Europe should be united like a country, countries have the one currency, there should therefore be the euro.

There’s the economic reality which is that Europe isn’t an optimal currency area. Note that “optimal” here already means taking into account ease of trade in one currency, as against the problems of one monetary policy for disparate economies etc.

That clash produced that bouncing of Britain out of the ERM. Germany needed, and got, different monetary conditions than the UK so the FX peg could not be held. Later, Germany needed laxer conditions than some of the periphery countries needed - thus Ireland and Spain’s property booms. Then again conditions differed and Greece needed - and, and, and.

Just to emphasise again. This is not about the political dreams themselves, whether that united Europe is a good idea or not. Clearly, we have views but that’s not what we’re on about here.

Rather, there’s a clear attempt to impose a political dream upon reality. Further, it’s not really working. Working in the sense that the economy can do its job of making the average person better off over time. That hasn’t been true of Italy for three decades now, just as an example.

Which brings us to the point we do want to make. There are many political dreams out there. There is also economic reality. In a clash between the two it’s the economics that wins out - as reality always does against dreams.

Which is what our recommendation for the New Year would be. Try to make sure that your political dreams are in fact things that accord with that economic reality.

Just one of those little things that confuses

Yes, OK, EV revolution, save the planet, blah blah. And yet:

Yet there are 25 gigafactories planned for the continent by 2030, according to BMI, as the industry races to keep up with soaring demand for electric cars. Nine of those are owned by Asian manufacturers, which control most of the global supply.

The UK is arguably further behind the rest of Europe, with plans for only two gigafactories.

It’s this idea that if you don’t, in fact, make it yourself then you’re behind.

We have checked behind the sofas and all that and we here at the ASI seem to be remarkably short of steel making capacity. And yet we’ve never faced an inability to find some steel when we’ve wanted some. Seem to be shops all over the country piled high with the stuff in fact. Barring the possible odd tree at Kew the entire UK is desperately short of banana production capacity and yet unlike any socialist economy ever there seems to be a reasonable supply in every supermarket in the land.

So with batteries. There is no reason that they must be locally made. We are not in League of Gentlemen here, where we require local things only for local people.

In short, haven’t these people ever heard of trade? We’ll do what we’re least bad at, everyone else does the same, swap the resultant production and we’re all as well off as we can be? Adam Smith published 245 years ago, David Ricardo 204, isn’t that enough time for the lessons to sink in?

Division and specialisation of labour, comparative advantage - trade. Seems simple enough to us but clearly it entirely blindsides all too many others.

This is before we get to the narrower point that if other folk are building 25 factories then that sounds like a really good business not to be in for ourselves. Investment manias leading to overcapacity - tulips through railways to dotcom and banking - are a real thing. So are the resultant bankruptcies.

This is entirely vile from The Guardian

It’s difficult for us to constrain our anger at this suggestion:

An alternative African strategy would see governments spending on public services and on increasing food and renewable energy sovereignty, while cracking down on corruption.

This provides a way out of the current development trap. In their book Africa’s Last Colonial Currency, Fanny Pigeaud and Ndongo Samba Sylla suggest that, instead of importing food and burning through foreign reserves, African states should produce food at home, as land, work and knowhow are abundant. “If they financed the development of their agriculture, they wouldn’t reduce their foreign exchange reserves; on the contrary, they would save money.”

State-owned enterprises and a competitive domestic private sector would help Africa evade activities demanded by the global north. As African countries become increasingly digital, data will be power in economic governance – and local entities must be its custodian, not transnational corporations. Trade agreements between countries of similar income levels are more beneficial for them compared with the World Trade Organization’s framework.

This is just the old idiocy dressed up in new clothes.

This used to be what was recommended for all of what was then called the “Third World”. Don’t trade with the richer capitalist places, aim for autarkic development. It didn’t work. Then we tried it the other way around, that global neoliberalism. Which worked, astonishingly well. This past 40 years has seen the greatest reduction in absolute poverty in the history of our species.

Now, when we’ve the one more heave to go - that absolute poverty is largely still concentrated in Africa - the argument is that we must abandon what provably works and return to the policy failures of the past.

Just how racist is The Guardian against black Africans? That they must be condemned to longer and deeper poverty to conform to fashionable metropolitan ideas?

It’s simply vile to be insisting on the policies that have been tried, have been seen to fail, once and yet again. How dare they?