On the things we need to regulate and those we don't

The specifics of this example are terrible for the point being made and yet there’s still something here for us:

Most people can instinctively spot a counterfeit bank note in a fraction of a second, according to a new study.

The larger issue is what is it that we need to regulate via the law, bureaucracy or politics, and what can be left to the regulation of folk just getting on with life?

Clearly, the issue of government bank notes is something we do want to regulate by the law, politics and so on. Gresham’s Law is true, bad money drives out good and all that. So we’re not going to try and argue that bank notes don’t need official regulation.

However, there is that larger point to draw from this. Handling a bank note is something that near all of us do with some regularity. Perhaps less than we used to in this digital age and so on, but it’s still something we have substantial experience of. Which is why we can immediately make that decision - we are experienced at the thing being done.

It’s the things we are inexperienced at, which we do rarely, where we can be more easily fooled. Practice does, after all, make perfect.

Which gives us a guide to what needs to be regulated by that law and politics and what doesn’t. Things that are done regularly can be left to us folk on our own - markets in effect. Things that are done rarely might well need that governmental intervention. Regulate pensions by all means - 50 years later is a bad time to find out about an error. Toothpaste flavours perhaps something reserved to the people.

If we could just suggest a solution here?

The problem is that if all of the area is concreted over then too little of the rain soaks into the ground, too much of it floods through the storm sewers:

House builders face new rules on paving driveways in an attempt to tackle river pollution, the water minister said as she called for an end to the practice.

Rebecca Pow, who spoke to The Telegraph about its Clean Rivers campaign in her Somerset constituency of Taunton Deane, said new developments could have to prove they had sustainable drainage systems before they were allowed to connect to local sewage networks in order to avoid them becoming overwhelmed and pumping sewage into rivers.

That is likely to include restrictions on solid paved driveways,

Well, yes, we agree, it is possible to try to micromanage matters in that manner. You’d probably have to go on to make sure no one created rockeries in the back garden, paved over any area for a little patio and so on. For it is the absence of soil to soak up the rain that is the problem.

There are those who would welcome the delights of so micromanaging other peoples’ lives as well. Every society, sadly, has more than its fair share of those.

We’d like to suggest that there is an alternative solution here. Lift the restrictions that insist upon 30 to 35 dwellings per hectare of planned land. That is, allow people to have the large gardens that are the traditional desire of the British. At which point, if they pave over a car’s worth of land there’s still that much larger area of flowerbeds, lawn - possibly even a veg bed - and so on to do the rainwater management trick.

That is, the problem is to resolved not by government doing something but by government stopping doing the damn fool thing it is already doing. As is so often the case.

Or, to put it more bluntly. The problem will be solved once we stop herding the helots into hovels. Now there’s an idea for a free country, eh?

We agree entirely, let's abolish subsidies

We have a little and simple test when people start talking about subsidies. If they say that subsidies to fossil fuels are around the $500 billion a year level then we’ll - barring further investigation - assume that their other subsidy numbers are about correct. If they say $5 trillion then we’re going to insist they’re not really talking about subsidies.

The difference is that the $500 billion number is actual subsidies. Governments buying up oil and or gas at one price then selling it to the population at a lower, that sort of thing. This is also something that doesn’t really happen in the rich world. The $5 trillion number includes the idea that everything should pay full VAT, if domestic gas - as in the UK, where the 5% rate applies - doesn’t then that’s a subsidy. Non- or under- taxation from some ethereally perfect rate might not be wise but it’s not really a “subsidy”.

At which point:

The world is spending at least $1.8tn (£1.3tn) every year on subsidies driving the annihilation of wildlife and a rise in global heating, according to a new study, prompting warnings that humanity is financing its own extinction.

Checking the report we see that fossil fuel subsidies are pinned at that $500 billion mark.

Fossil fuels: $640 billion

Well, right order of magnitude at least. So, we’re willing to accept, for the sake of argument at least, that the $1.8 trillion total is talking about actual subsidies. Also, in the footnotes:

The IMF has estimated that fossil fuel subsidies were $5.9 trillion in 2020, but the bulk of that number refers to the cost of selected externalities. The Dasgupta Review (2021) estimated $4-6 trillion for multiple sectors, but this figure includes the IMF estimates and represents subsidies as a whole and did not single out the environmentally harmful component.

A slightly different point from our own but leading to the same conclusion. The IMF judges by that ethereally pure taxation system that includes congestion, carbon, accidents etc all being properly taxed as externalities.

It’s this point that we disagree with:

The authors, who are leading subsidies experts, say a significant portion of the $1.8tn could be repurposed to support policies that are beneficial for nature and a transition to net zero, amid growing political division about the cost of decarbonising the global economy.

No.

We’re entirely willing to agree that such subsidies are a bad idea. OK, so stop paying them. But why not just not collect the money from the people in the first place? Why divert that sum, instead of not feed it into the political process in the first place? For we’ve evidence, pure and simple here, that politics spends such sums the wrong way. So, don’t collect the tax, don’t allow the politicians to spend it and make the world a better place. In both these environmental terms and also leaving near $2 trillion fructifying in the pockets of the populace?

To be possibly crude about it, if politics micturates away 2% of everything on killing off the environment then stop politicians having access to 2% of everything.

So we can reject this out of hand

There are certain statements about matters economic which act as those little red flags. If someone can make such an argument, use such logic, then everything else they’ve got to say on the subject can be rejected. For the thing they’ve said, that red flag, is of such absurdity that clearly they’ve no understanding of the point at issue.

At which point we give you Caroline Lucas:

Why else would they be arguing for more fracking or further North Sea gas investment, supposedly to drive bills down, when they know that any gas produced would sell at today’s global gas prices and simply feed windfall profits?

Rather than any arguments - true arguments as it happens, for natural gas is not globally fungible - that the set up to the point is wrong let’s take it as being correct.

So, we increase supply and that increased supply adds to global supply. That therefore means that it is the global price of gas that is changed by that increase in supply. All 7 billion human beings therefore benefit from North Sea or fracking production of natural gas. Or, perhaps only the roughly 5 billion in advanced societies that use natural gas. Or possibly every farmer in the world as fertiliser prices reduce. Or, well, lots and lots of people through a variety of channels.

The argument being put forward by Ms. Lucas is therefore “We can’t do that because just everyone will benefit!”

We can therefore reject everything Ms. Lucas has to say on the subject because that is, clearly and obviously, a logical argument of the utmost, extreme, absurdity.

Micromanaging

One of the failings of government is its tendency to attempt to micromanage things not appropriate to micromanagement, or things for which micromanagement is unnecessary.

During the first lockdown, government rules decreed that only ‘essential’ goods could be bought at supermarkets. Immediately the question arose as to what was or was not essential. Food was essential, but was a chocolate Easter egg? Alcohol was, but were crisps? Police forces threatened to search shopping trolleys to watch for goods they deemed non-essential, and would probably have done so had not they been firmly slapped down.

Similar confusing detail emerged when people were allowed to drink in pubs and bars provided they were eating. Eating what? Peanuts? Beef jerky? The order went out that it had to be “a substantial meal.” But what counted as substantial? Again came the confusing detail, highlighted when ministers contradicted each other over whether a scotch egg constituted a substantial meal. Similar complexity prevailed when exercise was allowed, but rules attempted to specify for how long and under what circumstances people were permitted to rest on benches.

It raises the question of whether it is appropriate, even during a pandemic, for governments to be going into fine details over what people might buy, what they might eat outside the home, the circumstances under which they can drink, and where they might sit and rest out of doors.

The Department of Health might regard it as part of its duty to recommend that people should drink alcohol sensibly and in moderation, but to suggest a limit of 14 units a week, a figure plucked at random from thin air, is to attempt to micromanage something that might be better done by sensible advice. The figure is so plainly absurd that most people just ignore it.

A regulation might specify the conditions required for a toilet at work. Pages of detail might cover the width and thickness of the seat, the material it may be made of, the height from the floor, and the shape, be it an oval or a horseshoe. Yet more pages might cover the provision of toilet paper, and the location of washing facilities. On the other hand, the regulator might specify a requirement for employers to provide “decent toilet facilities” for their employees. The question as to what constitutes “decent toilet facilities” would soon be decided by a series of complaints, suggestions and tribunals.

When the governments go into the business of attempting to control wages and prices and to set limits, upper or lower, on some of them, as governments have been doing for over 4000 years, they enter a minefield. The reason is that prices are signals, and there is no such thing as a fair price. Prices tell about the relationship between supply and demand. Shortages lead to higher prices which in turn encourage greater supply. To impose a price cap is like blocking up a thermostat to prevent a room becoming too hot or too cold.

The government’s price cap on energy, and the decision to raise it, are micromanagement of something best left to find its own level. When the wholesale price of energy went up because of a supply shortage, without suppliers being able to match it by retail price increases, many suppliers went bankrupt. A better policy would have been to make it easier to increase energy supply and allow the market to bring the price down.

Governments can sometimes manage, with varying degrees of efficiency, to provide those collective things difficult to obtain individually, things such as defence and the administration of justice. But when they try to micromanage the behaviour of disparate individuals through detailed and complex rules, it usually results in arbitrary requirements that seem to owe more to whim than to common sense.

We do wish that people would check the facts

We do think it slightly odd that we seem to be the only liberals left in town. There’s that little groundswell going on about Britain’s low fertility rate for example. Something must be done to ensure that there’s a population to tax in 50 years time, something like that.

We find the attitude puzzling to say the least. As liberals the aim, the goal, the value, is the liberty to be able to choose. So, if in a free society adult Britons choose to have fewer little Britons then, well, that’s the outcome of the liberty, isn’t it? Shrug. The liberty to make the choice is the societal aim, the results of the choices are irrelevant - absent third party effects of course.

But within that, as with all other arguments, we would still insist that people should check the facts. Take this from James Kirkup:

This brings us back to childcare, which the OECD calculates can cost 30 per cent of the wages of the typical double-income couple. That’s almost twice the cost in countries that make a proper effort to help people combine work and parenthood: a Finnish couple pays 18 per cent. The prohibitive costs of UK childcare should be a problem for everyone, but they fall more on women than men.

That all seems entirely logical until we check fertility rates. That for the UK is 1.65, that for Finland 1.35. The real world seems to be telling us that higher childcare costs produce more children - so if you desire more children lower childcare costs are not the way to go.

Yes, of course, it does seem absurd and we’d not rely upon those numbers too, too much ourselves. But think for a moment. Imagine a society in which having the one child really does block off any attempt at a career, or even work itself. The decision to have a child could well then lead to the decision to have many for the opportunity costs of the second, third and subsequent are much lower, aren’t they?

We’re not, of course, suggesting that as policy - see above about being liberals. But that does at least accord with the first and most important rule of economics, that incentives matter. It also has the useful attribute of according with reality as judged by those figures on offer from Mr. Kirkup.

We’re against the very idea of managing the population because we’re liberals. But even among those who would do so could we suggest that little exercise of checking the facts occasionally?

A short message from Marc Andreessen

Marc Andreessen gets some stick for some of his views, he’s also one of the leading venture capitalists of our day. In an ask me anything on Twitter he is asked “What do you find people in tech ( our outside) missing about web3 the most?”

The response is: “The enormous payoff from decentralization and permissionless innovation. I cannot believe more people don't understand this. It's so obvious.”

We would agree that it’s obvious but this isn’t something specific to Web3 (and we’ll admit we’ve no idea what that is supposed to mean). Not grasping it is also not something specific to tech bros, it’s a widespread misunderstanding across society.

For, of course, it’s the justification for a free market economy. Someone has an idea, they try it. If it works, they do more of it, others copy, the world advances because there’s one more thing being done that works.

In a world where permission is required then the world advances at the speed the permissions are granted. Or, given that those granting the permissions will not be omniscient nor necessarily benevolent the world does not advance as permission is not granted. This of course gets worse in a planned economy because the only things that are even put up for permission are those thought of by those in the planning system. Bureaucracies not being known as hotbeds of innovative ideas.

Our base problem to solve is that the universe of things we can do expands as technology advances. The list of things we want to have done varies with human tastes, fashions and even whims. We thus require some sort of matching process between what can be done and what folks want to have done. It is precisely the freedom of entry - that permissionless innovation, entirely decentralised as it is - into the market that defines that idea of the “free” market. It’s also the very feature of the system that works to make all of us, as we are, so stonkingly rich by any historic or geographic standard.

This is why certificates of need are an anathema. So too, to our mind, the ludicrous seismic restrictions upon fracking in the UK (no, we do not believe they are there for good scientific reason, they’re there to stop it happening). In fact, we argue that the economy as a whole is larded with these needs for permissions. Which is why so much of the innovation that does happen is in those new areas, online and in code, where there are no incumbents or bureaucracies to act as permission deniers.

Think, as a contrast, between the landraces going on in whatever that metaverse might be and the time it takes to gain planning permission in this real world. We expect several cycles of try, build, go bust and start again in that first in the time it would take to gain the permits to put in the footings in that second.

The speed of this matters. For economic growth is, by definition, the speed at which these new things happen. So, if we’ve built a society that requires permission to try new things then economic growth will be slower.

Or, as varied philosophers have been commenting upon since Adam Smith first pointed it out 246 years ago, let’s free the markets and all go get rich. Again that is, richer than the last 246 years of the process has already made us.

Civil Service - masters of detail

The UK civil service was long regarded as among the world’s very best. This was largely a reflection not necessarily of its efficiency, but of the relative absence of corruption. Civil servants were seen as working in the public interest, and unable to be bribed by vested interests. In other countries bureaucrats seemed to line their pockets and their bank balances, but our civil servants were content to do a lifetime’s work and at the end receive perhaps a £2 bronze medal from the Queen that allowed them to put letters after their name.

There are, however, features of the civil service mindset that work to inhibit reform and change. There is a defensive mentality in which they fear the possible consequences of new policies, and what effect any failings might have on their careers. They would no doubt argue that this represents a necessary caution, but it tends to be taken to an excessive level.

A feature that supports the status quo is that civil servants are masters of detail and prefer to tinker with things as they are, when sometimes a preferable policy might be to replace them with something better. They prefer to implement marginal increases or decreases in allowances or thresholds, or to add or subtract a few percentage points here and there, or to raise or lower staffing levels. In doing so they are taking the existing framework as a given, and making minor changes with a view to making it more efficient or to change it in line with changing events.

Sometimes it is the existing framework itself that needs to be changed, rather than tinkered with. Skill at manipulating the small details might make them oblivious to the big picture. If they look minutely at each leaf, they might not see the forest.

Sometimes when they are looking at ways of doing something better, they might miss the question of whether that thing should be done in the way that it is being done, albeit with minor modifications, or even the question of whether it should be done at all.

An obsession with detail is rather Continental, and perhaps acquired during our membership of the European Union. The rest of Europe is mostly governed by Statute Law in which the laws have to be set out in detail so that magistrates can apply the intentions of the legislators.  The English tradition has been more one of Common Law in which the principles are laid down and the details are filled in by a series of judgements by courts and tribunal’s.

The UK is now able, after Brexit, to unpick the thousands of onerous EU regulations that were built up over the decades of our membership. Given the choice, the civil service would probably prefer to examine each regulation and make minor changes here and there. What we should be asking is whether the regulations should be applied in the way that they have been and, indeed, whether they should be applied at all.

EU regulations have largely been process-driven, in which the recipients are told how they must do things. We now have a chance to move to result-driven regulation in which the legislators set out what is to be achieved and leave it to creativity and ingenuity to develop ways of achieving those results.

Civil servants should be given a clear directive from elected legislators to start by asking if each regulation is necessary at all, and then if its purpose might be better achieved by different methods. Detail is all very well, but we should not be so lost in it that we lose sight of principles.

Sorry about this but we'll just have to close down the NHS

As we all know racism is the ultimate sin of our times. Nothing that is racist, in any form, can be allowed to persist. Capitalism is racist - according to some - so that’ll have to go. Britain itself is racist so that’s got to be overturned. The language is racist, attitudes are racist, insititutions are, all must be scrubbed and rebuilt entirely anew:

Radical action is needed urgently to tackle “overwhelming” minority ethnic health inequalities in the NHS, leading experts have said, after a damning study found the “vast” and “widespread” inequity in every aspect of healthcare it reviewed was harming the health of millions of patients.

Racism, racial discrimination, barriers to accessing healthcare and woeful ethnicity data collection have “negatively impacted” the health of black, Asian and minority ethnic people in England for years, according to the review, commissioned by the NHS Race and Health Observatory, which reveals the true scale of health inequalities faced by ethnic minorities for the first time.

That’s that for the National Health Service then. As with those police forces it’ll just have to be defunded.

Hmm, what’s that? The NHS can be reformed so that it’s not racist you say? Ah, so where’s the proof that the universities, capitalism, Britain and all the rest cannot be then?

Charge of the Motor Brigade

Victoria Street, SW1 

“You know, Humphrey, I’m getting a bit worried by this Net Zero Carbon 2050 thing.  The chaps at the club don’t think it stands a prayer.” 

“It is indeed a challenging target, Minister, but the British people have the will and the creativity to achieve it.” 

“Really? The chaps round the bar think that’s the government’s job and they are wondering what rabbits we re going to pull out of what hats.” 

“I admit we are a bit short on rabbits, Minister, but one of them will undoubtedly appear. The Scots have so much wind that they export more electricity than they import. I read the other day that Scotland’s generation of electricity was 97% renewable and net exports of electricity (exports minus imports) in 2020 was its highest to date at 19.3 TWh, a 21% increase compared to 2019.” 

“Of course, Scotland is windier than the rest of the UK, Humphrey, but we cannot be sure they’ll even be part of the UK by 2050. What is UK electricity consumption and how much of that is from renewables?” 

“Last July, we announced that ‘Electricity generated from renewable sources in the UK in 2019 reached a record 37.1 percent of total UK electricity generation, up from 33.1 per cent in 2018. This increase reflected a 6.5 percent rise in renewable generation capacity to 47.2 GW.’” 

“Steaming ahead but that is based on current electricity consumption. A Net Zero world implies that energy will be virtually all electricity and in the same announcement we said renewables were only 12.3 percent of energy as a whole, i.e. including fossil fuels.” 

“Yes, I admit that multiplying current renewables by a large factor is difficult and we also have to address variation. The sun does not always shine, nor wind blow, so we will need renewables to produce well over our needs when they do shine and blow. We can then store the surplus for when they do not.” 

“Oh yes, Humphrey, and how are we going to do that?” 

“The motor car is going to come to our rescue, which makes a change from it being the villain.  I’ve called it the ‘Charge of the Motor Brigade’.” 

“I suppose we’re going to turn off the electricity in our homes and go to bed in balaclavas?” 

“Funnily enough, that’s about right, Minister.  Only electric cars will be sold after 2030 and we reckon 50 percent of cars on the road in 2050 will be electric out of the Ministry of Transport total estimate of 37M. That compares with 31M now.” 

“20 percent more traffic is going to burn up a lot of traffic idling in ever greater traffic jams.” 

“I think you’ll find, Minister, that electric cars use no power when they are stationary.” 

“Right, so we have 18.5M or so electric cars on the roads. That may prove optimistic.  Just a couple of weeks ago “a report by the Commons Transport Committee found that taxpayers face an eye-watering £35 billion bill to plug the gap created by the switch to electric cars.” They may be the biggest scam since Gordon Brown sold us diesels. The spokeswoman for this drainage scheme was more realistic: ‘That means one million electric cars could provide 4,000 megawatt hours to the grid at peak times – roughly the same as 5,000 onshore wind turbines.’”  

“That’s four TWh, Minister, and I expect you will tell me that’s only just over 1 percent of what the Grid needs a peak times and a lot smaller percent in 2050.  Not a big help.” 

Anyway, where do the balaclavas come in?” 

“Well that’s the clever bit. Because we’ll mostly be working from home, the cars will not actually be on the roads but in our garages or in our drives. The National Grid and the Octopus electricity company are working on a scheme which would allow the Grid to recycle the electricity, when it is not windy or sunny, by draining it from the batteries of our parked cars. Our bedrooms will be getting colder too because we will be using heat pumps – hence the balaclavas.” 

“Right, so the quarter of the UK population which then owns electric cars are going to buy charging units that not only charge the vehicle, but drains it?” 

“That’s it, Minister.  The car owner installs a smart two-way charger which can transfer up to seven KWh back to the Grid when it is needed but probably only about four as the average household needs three KWh. The Grid pays 15p per KWh for what it takes.” 

“Humphrey, according to the aide memoire in my desk drawer, the average domestic electricity price in 2021 was 18.9p per KWh. So I buy the electricity to charge my car at 18.9p per KWh and sell it back to the Grid for 15p and on top of that I have to buy a smart two-way charger at God knows what cost?” 

“Well, if you took the car down to the supermarket, they’d charge it without charge, so to speak.”  

“Do they do comedy lessons at the Civil Service College now, Humphrey?” 

“The Civil Service College does not include humour among its core values but it does have a strong partnership alliance with the Mongolian National Academy of Governance. I admit, Minister, that the economics of this do look unattractive today but a lot can change in 28 years.” 

“The last statistics I saw were October 2021 when we said 25,927 public electric vehicle charging devices available in the UK of which 4,923 were rapid chargers. I haven’t seen any data on private ownership and use.” 

“Minister, I agree the market will be limited by the cost of chargers and the need to have garaging or off-street parking.  Most people live in flats or houses with no off-street parking space. Councils can be difficult about running cables across pavements.  They are considered hazardous to elderly people with shopping trolleys.” 

 “So to sum up, Humphrey, we don’t know how many electric chargers there will be, whether allowing the Grid to help itself to the electricity the car owner has stored will make economic sense to the owner, how much electricity can be stored that way, whether that will meet the needs of the Grid when the wind doesn’t blow and the sun doesn’t shine and, most of all, who will have control.” 

“What do you mean by ‘control’, Minister?” 

“I can go to bed when there’s a nice wind blowing and then there a lull.  If the Grid has control, it can simply drain my car battery, so when I am ready to go to work next morning, the car has no juice.  Or does the Grid have to ring all potential providers in the middle of the night to ask their permission? Or do I have a drain/no drain switch on my charger, so that the Grid discovers it cannot have my electricity when it needs it? And how does it find me when I am not at home?” 

“All good questions, Minister.” 

“You remember what happened to the brigade that smart-charged during the Battle of Balaclava in 1854?  Disaster.  Lord Cardigan commanded the brigade, a nice enough chap, despite being arrogant and extravagant. Obviously nothing like our current Cabinet ministers, Humphrey.”