We agree, we really should be getting excited about this four-day week thing

This strikes us as a little unfair:

Wales has plenty of genuine problems it should be fixing. Instead it is embarking on a series of half-baked socialist experiments that are doomed to inevitably fail.

Certainly this is when we consider this plan:

Last week, Wales's “Future Generations Commissioner” (nope, don't ask me why as-yet-unborn Welsh children need a no doubt generously paid commissioner to look after them, I haven’t the foggiest) published a report arguing a four-day week should be the norm.

Sophie Howe suggests that the public sector should move to a four-day week to start with, and after that it could spread to what little remains of private industry.

We do agree that there can be problems in government, the state, running an economy for a population of 3.1 million. Observing national politics does not tell us that actual ability at running things is common. So, the talent that will rise up out of a 3.1 million pool is not - necessarily at least - going to be of such stellar quality that we’d want to hand over management of everything to them.

Perhaps this is why those who have so risen haven’t quite understood the issue under discussion.

The basic idea of working time falling as the society becomes richer, yes, of course. This has been happening for a couple of centuries now and we see no reason for it to stop. A richer population will take some of those greater riches as more leisure. We do insist that everyone has to grasp that this includes unpaid work in the household as well as paid work in the marketplace though. The truly massive workload drop of the 20th century took place as we automated that household. But once that’s done then yes, less work, more leisure, lead on!

Even so, there is significant misunderstanding here. The let’s all go do this urge in government these days is being fed by the Icelandic experience. A report on which is here.

Output remained static while working hours fell 10%. OK. But why did this happen?

To be able to work less while providing the same level of service, changes in the organisation of work therefore had to be implemented. Most commonly, this was done by rethinking how tasks were completed: shortening meetings, cutting out unnecessary tasks, and shifts arrangements

So the actual finding was that if the bureaucracy pulled their thumbs out they could do the work with 10% less labour. Which produces some interesting options for us. Most obviously, instead of each bureaucrat working 10% fewer hours it might be possible to have, instead, 10% fewer bureaucrats. Along with a 10% reduction in the tax bill necessary to support the bureaucracy.

For the maintenance of output wasn’t, in fact, because all workers were so joyous at having the time off. It was that the shock to the system allowed the identification of how working practices could be improved. It’s the shock that mattered, not the length of the work-week.

Which is a much more interesting finding than the one usually assumed. It also leads to possibly interesting plans for Wales other than that insistence upon the four-day week.

But, you know, that does depend upon that Welsh talent pool producing those who can understand the reports they’re using to guide their policies. Here’s hoping….

Student loans, Aussie style

It seems that, currently, Australia does cricket better than we do. It also seems that their system of healthcare outclasses ours in terms of quality of outcomes, costs, and access to treatment when needed. To complete their hat-trick, they also finance higher education significantly better than we do. It scores far higher in terms of student satisfaction, and a much smaller proportion of debt has to be written off.

Students accepted at Australian universities have their fees paid, and incur an obligation to repay that sum once they are earning sufficient salary. There are differences, however, between their system and the UK system of student loans.One big difference is that, while the total default rate of non-repayment in the UK is nearly 50%, in Australia it is closer to 15%. There are two reasons that probably account for this.

The first is that there is no interest added to student loans in Australia. They are topped up each year only in line with inflation meaning there is no increase in real terms. In the UK, by contrast, 3% is added to the rate of inflation. This currently means that the outstanding loans in the UK are increasing by 8% per year and the debt is piling up.

A second reason is that the salary at which repayment has to start is set lower in Australia than it is in the UK. This means that Australian students start to repay their loans earlier. These two factors probably account for a default rate which is less than one third of that in the UK. The Australian system of university finance is not a graduate tax because repayments cease once the entire cost has been repaid. A graduate tax, by contrast, would continue as long as the graduate were earning.

As we have urged several times before, the abolition of the interest surcharge in the UK would almost certainly be self-financing because of the very much lower default rate that would result. It would also be very popular with students, a factor that makes it politically attractive as well as making economic sense.

If we were to adopt elements of the Australian system of student finance, this would undoubtedly improve our own outcomes. The same is true of the Australian health system, which also has much to teach us. Alas, the problem of improving our cricket outcomes to match those of Australia’s is much more challenging, but two out of three wouldn’t be a bad score.

On the subject of linen shirts

Adam Smith pointed out that a linen shirt is not a necessity. However, if you live in a society where not being able to afford a linen shirt is taken as a sign of poverty, then if you cannot afford a linen shirt then in that society you can - possibly will be - regarded as poor.

Furniture poverty: the price of moving in to an empty house

We will admit this is a new one on us but there’s an interesting point here:

“Household appliances are not luxuries – they are essentials;”

An example used is a washing machine. Which is a fairly new definition of necessity. The washing machine itself - as opposed to the copper tub and mangles - is less than a century old as anything like a common appliance. As Hans Rosling liked to point out. It’s also possible to point to the post-WWII boom in launderettes and their gradual disappearance in more recent times as evidence in the same direction. The idea that a washing machine is an essential - and we do not doubt that given where we are now that this is true - is very modern.

All of which can and should be taken as a measure of how much richer we are. There’s that ever growing list of things that are now taken to be essentials - fuel poverty today includes the normal middle class lifestyle of the 1970s, certainly that of the 1960s - which people are defined as being poor for being without. That very list itself is proof of how much richer we all are than our forbears.

We can indeed continue to shout about how awful it is that some still do not have these now essentials. But it is worth the occasional nod in the direction of the opposite, a little consideration of how rich we are to consider these those essentials.

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.