Greed works you know

Or perhaps we should say enlightened self-interest does.

We present two tales from yesterday’s Guardian. First:

The Indian coal mining tycoon Gautam Adani has become Asia’s richest person thanks to a push into green energy that has boosted his fortune to $88.5bn.

He and his companies are investing fortunes in that green energy:

The group is in the process of ploughing $70bn into green energy projects by 2030 with the aim of becoming the world’s largest renewable-energy producer.

Of course, this may work and it may not. But something is indeed happening at least.

The second:

British farmers must reduce their production of meat and dairy by a third in the next 10 years if scientific advice on limiting greenhouse gas emissions is to be met, the conservation charity WWF has said.

British farmers must reduce production, reduce their incomes, for some lovely but societal goal. Act against their own immediate, even medium term, incentives that is.

Which structure do we think is going to work better? A system in which someone beats Croesus by reducing climate change or one in which stout yeomen must attempt to rival Lazarus for poverty? No, not which would work better if humans were not as they are but given the nature of the species, which is going to work?

Quite, the solution to climate change is to engineer the price system so that people become rich by creating that solution. As M’Lord Stern has pointed out, Bill Nordhaus got the Nobel for saying and as 90% of polled economists shout very loudly indeed when asked.

So why are we allowing the loons to try and plan this for us using method 2?

How people become famous

Rainer Zitelmann, whose previous books include ”The Power of Capitalism and “Dare to be Different and Grow Rich,” has produced a volume telling his readers “How People Become Famous.” As with several of his other books, he chooses to do this through examples, looking at the careers of several famous people. In its pages we see such figures as Albert Einstein, Andy Warhol, Stephen Hawking and Donald Trump. Several others are included such as Steve Jobs, Madonna and Princess Diana.

Many of us might find it difficult to discern what such a disparate group had in common with each other, but Dr Zitelmann shows that all of them had and used the power of self-marketing. All of them deliberately projected themselves to the world through a variety of techniques that they shared.

One might think that fame requires one to be among the best in one’s field, but the author shows that this is not necessarily true. They were scientists who made a bigger contribution than Stephen Hawking. There were real estate dealers who did far better than Donald Trump. Princess Diana had only lacklustre schooldays, only winning prizes only as “most popular girl” and for “the best kept guinea pig.”

What they did do was to carefully cultivate a distinctive image. As Doctor Zitelmann puts it, “one of the rules of self-marketing is that you don’t need to look better, you need to look different.” Albert Einstein deliberately cultivated his image as a dishevelled scientist and an eccentric. Andy Warhol exhibited an instantly recognizable look. The others, too, had a distinctive trademark look that marked them out.

All made sure always to do things that drew attention to themselves. Famously Schwarzenegger went out in the street in his posing brief to be photographed at a building site. The photo was in many of the papers next day.

None of the figures in the book ever wanted to be like everyone else. They all believed they were special. All of them sought the company of other celebrities knowing this would enhance their own fame. Each of them was, in his or her own way, an expert at self-promotion. What they had in common, says Dr Zitelmann, was the ability to market themselves to the public.

Often it took a degree of provocation, doing somewhat outrageous things, doing things that are noticed. They thought it was better to be thought shocking than not thought of at all, though many had the sense later in their careers to back down from the shock value they courted initially.

Many of them cultivated an image of being close to people. Steve Jobs and his trademark roll-neck black jumper and jeans, Donald Trump who spoke the language of ordinary people and liked many of the things that they enjoyed doing. Many maintained the sense of self irony, and an ability to laugh at themselves, and most retained an almost childlike self-obsession late into their lives.

The author takes his readers through the lives of a dozen superstar celebrities, analyzing how they achieved that status. The book is a fascinating read, crammed with insightful anecdotes.

The problem with plans and targets is what are you measuring, how?

We thought this was interesting:

Britons are going to have to spend upwards of £100 billion improving their homes if they are to meet the government’s energy efficiency regulations, analysts have estimated.

That idea that net zero is going to be cheaper takes a slight knock. As, logically, it cannot be cheaper. For if it were cheaper then we’d all do it anyway. The people insisting there must be plans and forcing of the issue are the very folk insisting it cannot be cheaper - otherwise, why the plans and the forcing?

But our point today is that it does matter what you measure, how:

Landlords are required to hit a minimum rating under upcoming rules and some mortgage providers take the certificates into account when lending.

But the way that the ratings are currently estimated means that replacing a traditional gas boiler with a heat pump can lower a home's energy efficiency rating.

That would seem to be a problem with the plans, no?

Given that heat pumps can actually increase energy use

Ah, the plan seems to be that in the name of energy efficiency we should use more energy. Plans of mice and men and all that.

The larger point though, beyond the snickering at people who have no clue about economics trying to manage an economy, is that near all such plans depend upon what it is that is being measured and how. All too often the details of what is being measured getting lost and thus the plans and targets not actually achieving the desired goal.

Take, for example, this idea that lots of “free” childcare will boost GDP. Sure, it will - but that’s because GDP measures monetised interactions. A detail that is really quite important. That children are taken care of seems to be a reasonable societal goal. But moving it from being something done by mothers inside the household to other young women (it is always largely young women who do this work either way) outside the household and intermediated by money doesn’t in fact change the amount of childcare going on. It just monetises that activity and so boosts GDP without actually changing anything else very much.

The method of measurement obscures the reality, not illuminates. We can go on - the concept of relative poverty means that poverty falls in recessions. Everyone gets poorer and poverty reduces?

It is, as the mantra goes, only possible to manage what you measure. But the method of measurement, the details of it, matters vastly for that method of management. Which is why we ourselves think that detailed management shouldn’t be done. Because no one ever does - not in politics - either understand nor even accept the implications of the detail of the measurement system.

If something really must be done then change the price system and leave folk to get on with it. Actual targets and plans just aren’t going to work. Even on important things they’re not going to. As here, we’re to save the planet from our energy consumption by installing heat pumps and increasing our energy consumption? And this is something that government is actually going to force us to do? Err, yes….

Why government directed and paid for pharmaceutical research will never work

There is, as we all know, a considerable campaign out there to insist that the private sector should be excised from the pharmaceutical drug development system. Groups like Global Justice Now march around insisting that it’s evil that capitalists make money here. Vastly more sensible people like the American economist Dean Baker suggest that government should both pay for and direct such research. That way that patent system - and the high costs of that first 10 years of drug deployment - could be avoided.

Our first line of defence of the current system is that changing who pays the costs doesn’t in fact change the costs themselves. If it costs $1 to $2 billion to develop and gain a licence for a new drug - which it does - then that’s what it costs to develop a new drug. Taxpayers can pay this through the prices of drugs after the capitalists have funded it or they - we - can pay it upfront under the direction of the politicians.

It’s not entirely necessary to buy into our core conviction that politcians are useless, counterproductive even, at allocating capital to think that perhaps that second system might not be all that much of an improvement upon the first and extant one.

But there’s another argument, a clinching one:

The UK government ordered the jab, under development by Valneva, in 2020. However, after rolling out vaccines by Pfizer, Moderna and AstraZeneca, it scrapped that order in September last year. Valneva said ministers had thrown it “under the bus” when the €1.4 billion deal was pulled. Shares in the company, which is listed on Nasdaq in the US as well as in Paris, fell more than 45 per cent.

Now it has emerged that the terminated agreement cost taxpayers €253.3 million (£214 million) in non-refundable payments that the government had already made. In results for 2021, Valneva revealed that revenues had risen by 216 per cent to €348.1 million, which included that €253.3 million relating to the terminated UK Covid vaccine deal.

The expense comes after the government was condemned after admitting that £10 billion of spending on PPE had been written off. Hundreds of millions were wasted on unusable equipment that had passed its expiry date, while taxpayers paid extra in the scramble for masks and gowns at the start of the pandemic. It has also been criticised for failing to stem fraud in Covid loan schemes.

Wes Streeting, the shadow health secretary, said the Valneva expense was “yet another example of wasteful and careless spending” by the government. “The Tories have already lost billions of taxpayers’ money to fraud and waste during the pandemic,” he said. “The British public are paying the price... in higher taxes.”

Yes, OK, Wes is the definition of student politics promoted beyond ability or experience but still. This is the problem with any government funded and directed development process. There will be mistakes, there will be errors. Not in the sense of damn, that was a bad decision to make, but damn, well, that one didn’t work out, did it? Because that’s how development does work out.

The entire world of R&D is to explore the universe of what can be done and see where that coincides with what we’d like to have done. It is, by definition, a process of trial and error. The error is not just an inevitable part of the process it’s an important one too.

So, wrap that all up into politics and any politician who does make such an error - recall, we’d actually like them to make error in this field, find out things that don’t work as well as those that do - will be attacked and possibly defenestrated for having done so. Which kills off that exploration mission that is the mission itself.

The capitalists shrug, say damn that one didn’t work and look around for the next mistake to make. Politics does not, will not and cannot work that way. Therefore politics isn’t the right way to manage this process.

Of course, not allowing Wes Streeting near any decision is one way to deal with this but we would remind that the National Union of Students does still exist and there’ll be another Wes along every year.

Politics never will give pharma development room to make those mistakes therefore politics cannot drive pharma development.

We should indeed take Terry Pratchett seriously

The Financial Times tells us that we should take Terry (Sir Pterry that is) Pratchett seriously as a commentator on this real world around us. The fantasy elements are just there to disguise the pointed nature of the observations on this real world out here.

Pratchett thus combines the social commentary of Boz, the machinations of Machiavelli, the political theory of Mill and the philosophy of Arendt, and all that with wizards, jokes and a grim reaper who could “murder a curry”. Wisdom, humanity and serious social commentary. That sounds like something serious people could do with taking seriously.

The politics of Mill, yes, but there’s also a substantial leavening of the economics of Smith and Ricardo. Even of Mancur Olson as well - the roving bandits live appallingly badly as do their victims, those subject to an enlightened but stationary one do very well indeed. That enlightened nature allowing folk to do their own thing, without interference, to work, invent and trade as they wish.

Throughout that Pratchettian universe it is laissez faire that makes the populace richer. Not an entire “do nothing” order, but one that contains enough order to allow markets and capitalism to flourish. The peace, easy taxes and tolerable administration of justice thing, with that emphasis on both easy and tolerable.

Yes, perhaps people should take this all more seriously.

We’d also point out that - with so many of us here having experience of how this specific industry works - “The Truth” is the best satire on newspapers since Evelyn Waugh’s “Scoop”. Whether Piers M. actually sat for the word portrait of C.M.O.T D. we’re not sure but we do find it explains a lot to think of it that way.

However amusing the concept, let us take Christine Lagarde seriously for a moment

Ms. Lagarde tells us that:

Britain’s inflation problems are worse because Brexit has drained the UK workforce, Christine Lagarde said as the European Central Bank stuck to its ultra-loose monetary stance.

“I don't want to take a political stand, but I think that there was a lot of non-UK labour force that eventually had to leave the United Kingdom, which has not been totally replaced,” the ECB president said.

“The shortage of work is actually having a bearing on the forces of the labour market in the UK.”

The absence of that EU workforce is leading to wage push inflation in the UK that is. As we pointed out elsewhere some time ago:

Brexit is about to give us a problem with this, though. Karl Marx was right: wages won’t rise when there’s spare labour available, his “reserve army” of the unemployed. The capitalist doesn’t have to increase pay to gain more workers if there’s a squad of the starving eager to labour for a crust. But if there are no unemployed, labour must be tempted away from other employers, and one’s own workers have to be pampered so they do not leave. When capitalists compete for the labour they profit from, wages rise.

Britain’s reserve army of workers now resides in Wroclaw, Vilnius, Brno, the cities of eastern Europe. The Polish plumbers of lore did flood in and when the work dried up they ebbed away again. The net effect of Brexit will be that British wages rise as the labour force shrinks and employers have to compete for the sweat of hand and brow.

If a lack of that free movement of EU labour leads to higher wages now, then the presence of that EU labour must have led to lower wages then. It is not just possible but mandatory in politics to have it both ways but reality doesn’t work that way.

See what joys we can uncover from, however amusingly, taking Ms. Lagarde seriously.

Do note though what the point is. It is not that immigration lowers wages for the incomers bring with them their demand as well as their labour. It’s that temporary immigration does, that creation of the reserve army outside the economy.

We'd just like to point out that we did tell you so

Crowing about having been right can be an unattractive behaviour. Pointing out that one was right is a duty of course:

Lockdowns prevented just 0.2 per cent of deaths in comparison with simply trusting people to do the right thing, a new study suggests.

Researchers from Johns Hopkins University, in the US, Lund University, in Sweden and the Centre for Political Studies, in Denmark, said the costs to society far outweighed the benefits and called for lockdown to be “rejected out of hand” as a future pandemic policy.

The finding being, in this new study, that once people know what will help then they mostly do what will help:

“We think that most people don’t want to get sick or infect their neighbours, so if you just give people the proper knowledge they do the right thing to take care of themselves, and others, and so that’s why lockdowns don’t work.

“In general, we should trust that people can make the right decisions, so the key thing is to educate them and tell them when the infection rates are high and when it’s dangerous to go out and how to protect yourself.

Rational adult humans act humanely, rationally and in adult fashion. Surprise!

As we pointed out way back at the start of all of this:

…an important point here, for this is an example of a pernicious worldview. That we, the people, are only able to cope if we are told what to do, what we may do. All must be decided and enforced by the clever people in power and nothing left to ordinary folks to get on with.

…

Be adult, be responsible, and the best of British to you.

As we say, crowing about having told you so can be unattractive but we did tell you so. Informing the people is somewhere between useful and necessary, trusting the people just plain damn well works. This has implications for an awful lot more of society than just pandemics of course - education, charity, the economy itself….

How does anyone think politics works?

The Guardian is most put out. Those in government have a discretionary pot of money to allocate and they’re using that discretion to send the money to those who voted for them:

Some of the wealthiest parts of England, including areas represented by government ministers, have so far been allocated 10 times more money per capita than the poorest under Boris Johnson’s “levelling up” agenda, Guardian analysis has found.

Quite why this should be a surprise to anyone entirely floors us.

It’s possible to take the 30,000 foot view here and insist that this is merely democracy happening. During the Blair years (or The Brown Terror, to taste) there was a significant reallocation of the proceeds of the uniform business rate. Richer, Tory voting areas ended up sending lots of that revenue off to poorer, Labour voting areas. Then came election time, those who promised to reverse this were elected and reverse it they did. Much of the more recent whining about cuts in council grants is a result of this process - the reversal of that subsidy across areas.

In that 30,000 foot view this is also what is supposed to happen. Folk get elected, do something, the electorate observes and considers and votes in the other lot to reverse it. Well, it is the people who are supposed to decide, right?

It’s also possible to take a more cynical view - although we prefer the marker “realistic” here. How does anyone think politics works? Votes are bought by promising nice things paid for with other peoples’ money. So, those who win elections will use other peoples’ money to reward their voters.

Shrug.

As to what we do about it, less government is the only possible answer. The incentives here are such that anyone who gains the power to benefit those who elect them to power will do so. That simply is how the game will be played whatever else anyone says about it. So, the only way to stop the bribery is to stop the ability to bribe.

If there never are discretionary pots to allocate, reallocations from voting block to voting block, then the voters cannot be bribed by those promises and revenue streams, can they?

Or, as is obviously true, and also so often true, minarchy is the solution to this problem.

A cost of living crisis is coming

Many households in Britain will face increased costs in the coming months. For some it will constitute a cost of living crisis. While the causes of this are many and varied, most of them fall into one of two categories: they have either been caused directly by government, or they could have been prevented by government.

One of the biggest increases will be for energy. Gas and electricity bills are set to go up by huge amounts. Gas is relatively clean compared to the coal it replaces, yet the government has cowed to an economically illiterate climate lobby that chants “fossil fuel” without regard to the role gas could play in bridging the energy gap until solar and wind become sufficiently plentiful and cheap. There is a wealth of gas under our feet, yet the government has effectively banned hydraulic fracturing by setting an impossibly low limit on underground tremors that barely register. If that limit were raised, and alternative technologies were encouraged to extract the gas, the energy shortage would cease and the prices would fall.

Energy bills on retail sources were capped for consumers, while wholesale prices went unchecked. Inevitably, as the wholesale prices rose and producers were unable to pass them on, many went bankrupt, reducing both supply and choice. The price cap has led to increased energy prices, and the sensible solution would be to scrap it. The commitment to Net Zero Carbon is set to bring prohibitive cost and price increases, and the decision to require gas boilers to be replaced by fuel pumps will cost thousands per household.

Government could do much to facilitate the development of the new small-scale nuclear reactors, but again it seems too afraid of the anti-nuclear lobby to take a bold initiative. Nuclear is a renewable and non-polluting source of energy as far as climate is concerned.

The climate levy imposed on businesses in pursuit of a green agenda has increased the cost of the energy they use, and this has been passed on to their customers by way of increased prices. This has hit transport businesses hard. And although train companies are exempt from the levy, rail fares are set to increase faster than inflation, hitting commuters and other passengers.

Increases in the Living Wage have increased labour costs for businesses, costs that are being passed on to their customers by way of higher prices. This is particularly so in sectors such as hospitality that use minimum wage labour to keep costs down.

Tax increases are contributing significantly to household spending. Thresholds are not being fully indexed, dragging more people into higher tax brackets. The threshold salary that starts university loan repayment has been frozen, meaning more people will pay on lower real incomes. Steep rises in Council Tax are also on the way. And the 1.25% Health & Social Care Levy announced for April will hit the pay packets of quite modest wage-earners. If the government needs more money, it should borrow, rather than tax. Borrowing can be repaid out of booming growth, whereas tax increases will stunt that growth.

The government’s backtrack on its proposed housebuilding reforms have meant that housing will continue to be in short supply, raising prices and mortgages. There is a soaring demand for rental properties with a shrinking supply of suitable ones. This has pushed up the rent costs that for young people in cities constitute a large part of their budget.

The list goes on. Telephone charges are going up, and rises are on the way for TV and broadband. And everyone who shops in a supermarket has seen prices going up at much more than the published rate of inflation. Some of this is obvious as people have to pay more than they did before, but added to it are the concealed rises where the price stays the same, but for a reduced size or quantity. And the very low-priced supermarket specials such as beans at 10p a tin seem harder to find.

This coming crisis is bad news for households, and therefore bad news for the government that presides over it. Yet the solution is not difficult. They should stop doing the fashionable things that attract praise from obsessive NGOs and their acolytes, but which impose heavy costs on ordinary citizens. They should instead do what they were elected to do.

It's so difficult to get Polly Toynbee to understand

One of the little difficulties of life is that some folk just have knee jerk reactions. Take this from Polly Toynbee about health and social care:

Here’s how the Northumbrian plan works: Mackey’s trust has bid for social care contracts from local authorities that would usually be awarded to private providers. The NHS foundation will seamlessly integrate domiciliary care within the health service. Mackey plans to build care homes to take over residential contracts too, if he can raise the capital. Here is a smooth transition without bottlenecks between the two sectors, with health and social care funded from the same budget, with every incentive to stop people needing a hospital bed and to get them home quicker when they do.

Polly would expect us to think this is a disaster - see, this is going against the privatisation and contracting that the neoliberals insist upon!

We, those neoliberals insisting upon the privatisation and the contracting, insist that this is the point, the very purpose.

We don’t know - the government doesn't, the health trusts don’t and obviously Polly doesn't - know what the finest method of organising, in detail, this cooperation across health and social care is. Clearly there needs to be cooperation here. But between whom and how?

Which is what markets allow. The competition part of markets is the ability to choose whom to cooperate with. Further, in what manner will that cooperation take place?

So, in order for us to find out what is the best method of cooperation across these related fields we need to have markets so that the necessary experiments can be done to work out who should be cooperating with each other and how? If it turns out to be the health trusts doing it internally then fine, if it turns out not to be then also fine.

The entire point of markets and contracting is to set up the system so that we can find out. We are in a discovery process and that can only work if different people are conducting different experiments and thus illuminating the problem from different angles.

Now we do have our own kneejerk here which is that we think integration under a centralised bureaucracy is unlikely to end up being the efficient or even equitable solution but we are willing to be pleasantly surprised by the outcome. For this is the entire purpose and point of the system. What is it that actually - on the ground, provably, reliably and copyably - works? Great, so let’s then go do more of that then.

It’s the finding out which justifies markets.