Nobody knows anything

We’re not convinced that this is the whole of the truth, the entirety, but let’s go with this as a working assumption:

Venture capitalists are clueless – the likes of Klarna and Uber prove it

As values crash, it's becoming clear that many VC firms simply got lucky once and have coasted ever since

Having the clueless spraying around societal resources doesn’t sound like all that good an idea if we’re honest about it. It would also seem to be a verification of William Goldman’s line, “Nobody knows anything.” Which also leads to the follow up “not one person in the entire motion picture field knows for a certainty what’s going to work”.

We are willing to agree, entirely, with that second version of the point. Also, to believe it about the wider society and economy. Varied people might have some ideas of what might happen, try to position themselves to take advantage of it, but no one is certain about what will work.

But if having the VCs spraying those resources around isn’t entirely optimal then of course this suggests that some different method will do better. Which is where those economic planners make their entry. If we use the very bright people - those Rolls Royce minds - who populate the Civil Service (and, to be even more ludicrous, the less RR minds that constitute politics) to decide upon what everyone else must do then resources won’t get wasted, will they?

Except, of course, the entire point of planning is that there will only be the one way that anything gets done. But we’ve all just agreed that no one knows what will work. So deciding upon just the one way takes us further away from other discovery of any of the ways that might work. For we’ve concentrated the decision down onto the one single method which is no more - or to be fair, less - likely to work than any other.

The VCs directing matters from Mayfair isn’t, we’re aware, all that appealing. There are those who would prefer the Civil Service to be doing it just down the road in Whitehall.

But the actual point here is that VCs is plural, meaning many experiments, “the” Civil Service is singular, meaning just the one essay at an attempt. And in the fog of ignorance which system is more likely to luck into something that works? The one with multiple attempts of course.

Or, as has been pointed out more formally before, markets are the way in which we experiment to find out what works, something that planning doesn’t do nor even allow.

All of this long before we consider whether today’s Civil Service or politics does in fact contain the Rolls Royce minds of our generation where finance does not. We ourselves know large numbers of people in both of those sectors, we’d need more than just a certain amount of convincing of that contention.

Sadly, John McDonnell appears not to know what poverty is

One of the little difficulties possible is that if a weird, or odd, definition of something is used then folk might forget what that definition is. Thus they end up spouting nonsense because they use numbers as defined but forgetting why the definition used militates against their proposed policies. This has just happened to John McDonnell on the subject of poverty:

There are 14.5 million people in poverty in Britain, including 4.3 million children. Two-thirds of those children are in a household where someone is in work. If you are in work, even if your company is booming, you have little say over whether you will benefit from its profits. If your landlord increases your rent or threatens eviction, or if your mortgage company fails to pass on interest rate cuts, you are largely powerless.

The prices of the basic goods you need to live on are set by a small group of multinational companies that between them carve up the market and set the prices to profiteer. So it’s a statement of the obvious that poverty is caused by the combination of low incomes and high living costs faced by many British people. But what brought this about?

That is, we’re afraid, abject nonsense. Not because it disses our favoured neoliberalism, nor because it’s against our beloved markets. But because it doesn’t understand the definition of poverty being used.

Which is living in a household on less than 60% of median household income, adjusted for size, after housing costs. This measure of poverty is one of relative poverty - having less than others. Carving up markets, profiteering, have nothing to do with this whatsoever. This is about the distribution of incomes, not the prices of goods and services.

Think on it - if every income in Britain doubled tomorrow then the poverty level would be exactly the same as it is today but living costs would be remarkably more affordable. If every income halved then inequality in income distribution would be exactly as it is today and therefore so would poverty - while living costs would have become remarkably less affordable.

The poverty level claimed is all entirely nothing to do with high living costs at all. Because of that original definition of poverty being used - one of inequality, not absolute standards of living.

The problem with forgetting - if ever even known in the first place - the definitions created to show how appalling the modern world has become is that by forgetting one misses what has in fact been defined. Therefore any proposals to fix the problem fail given the lack of knowledge of what has originally been defined.

Or, you know. GIGO. Garbage In, Garbage Out.

McDonnell’s original statistic is about inequality of incomes, his subsequent burbling is about the absolute level of prices. These are entirely different things. He’s therefore wrong because he’s forgotten how his original numbers were compiled and defined.

Net zero doesn't mean that aviation needs to be zero

There’s an horrendous logical mistake being made over climate change and emissions. Ah, yes, we might say several but just stick with this one for the moment. Take this net zero idea as a goal - no, just assume that to begin with and let us then explore.

We then get told that individual sectors, or actors, or activities, must then become non-emittive. Which isn’t the point of net zero at all, rather, society as a whole should create no net emissions.

This does matter:

Where are we with emissions? The IBA consultancy ran a webinar last week looking at just that question. Since 2018 the average amount of CO2 produced per seat flown has fallen by nearly 6 per cent. But total emissions are due to increase, thanks to commercial aviation’s steady growth. Next year we are forecast to be back roughly where we were before the pandemic struck, with 900 million tonnes of CO2 produced by airline fleets. After running through the various new technologies available, IBA concludes: “There is no readily available technology to radically decarbonise aviation.”

The industry has a goal of reaching net-zero emissions by 2050.

But the industry shouldn’t be trying to reach net zero - it’s the whole society which has that aim. The entire point of the “net” part of the phrase is that there will be emissions, somewhere in some corner of the economy, and that those will be outweighed by negative emissions elsewhere. This does - logically and obviously - mean that we’re fine with there being positive emissions somewhere, in some corner of the economy.

Net zero doesn’t mean that all activities must be non-emittive, it means, by definition, exactly the opposite.

Now we have our suspicion - and it’s no more than that - that the way aviation will work out is cheap solar to electrolysis, green hydrogen through Fischer Tropf to jet fuel. That would be a zero gross emissions process.

But we do still insist upon this basic logic. The very fact that the rallying cry is “net zero” emissions includes, as a logical certainty, that we’re fine with certain activities creating emissions. Simply because if we weren’t then the cry would be “zero” emissions, not “net zero”.

Zero emissions having a certain problem to it, as with humans and other mammals continuing to breathe.

But why do we want to entice people out of their cars?

Something we don’t understand:

After two years of Covid-driven decline in public transport use and increasing automobile traffic globally, what can governments do to entice people out of their cars?

Why would we want to do this?

Yes, of course, we understand the climate change argument about emissions. We grasp the one about urban pollution from tailpipes too. We’re not sure we wholly agree with either argument but we do grasp what they are. We’re also absolutely certain that folk like autonomous transport, that which allows the ability to travel from anywhere to anywhere, anywhen.

So, assuming we can solve those two claimed pollution problems then why would we want to get people out of cars?

And society does at least claim to have a method of solving those two pollution problems, electric vehicles. Which is where we get confused. If we’ve already got that solution which we’re paying billions upon tens of billions to put into effect then why is there also this push to solve that problem already solved at such expense?

Of course, no one would possibly be using climate change, or urban pollution, as some excuse to remake society in some collective direction. It would be absurd to place the entire mobility of society in the hands of public sector unions, of course it would, unless there was no other possible solution to our problems.

So, given that no one would hide their motives, nor deliver us into economic bondage, in that manner just why would we want to tease people out of their cars? We’ve already solved the problem with EVs.

What is it that we’re not grasping here? If EVs don’t solve the problem then why are we bothering, if they do then why do anything else?

Adieu ASI!

Today marks my final day as part of Team ASI. My stint at this gilded institute has been defined by opportunities I truly could never have imagined and meeting the kind of people that would make any nineteen-year-old politics buff tremble at the knees.

Since first entering the imposing wooden doors I was instantly struck by the energy oozing from each corner of the building. The rich ensemble of classical liberal memorabilia adorning the walls and bookshelves to the archives of research papers chronicling the history of the free-market revolution over the past four decades. But the true excitement is in the people here. It has been a delight to meet the wide range of characters that come to our events and feel a real sense of growing camaraderie with the regular attendees. 

Yet my experience would have been far diminished if not for the Adam Smith Institute team. Being at first nervous in moving hours away from my quiet Cheshire family home, the superbly talented ASI staff were instantly hospitable and warm, and soon my initial worries disappeared. 

In my time here I have been exposed to a wide range of duties. Regular intern responsibilities involve maintaining a clean upkeep of the office and scanning documents when called upon. Yet this was not all I did in order to receive the monthly stipend. I have been eager to immerse myself in the esteemed ‘wonk’ side of the Institute, something I’ve found the ASI to be more than receptive towards. This has led to me producing a wide-range of internal research papers, co-authoring the influential briefing paper ‘Pulling Out All the Stops’, having work I’ve produced on childcare being forwarded onto MPs as well as being the focus of a roundtable discussion for Parliamentarians. This comes alongside countless articles I’ve written for outlets including CapX and 1828, having discovered a real passion for writing.

But don’t be mistaken in thinking the ASI is all work and no play. I have been greatly fortunate to attend two staff trips: a week in blistering hot Gran Canaria, and jetting off for lunch in Copenhagen (yes, lunch), besides a five-day excursion to Colorado for a conference with the Objective Standard Institute. A highlight of mine was in turning a year older on a particularly, uhm, ‘blurry’ night this May, surrounded by friends from the ASI in the classic Westminster establishment, Players Bar. But if there is one memory that time will endure, it would be our July ‘The Next Generation’ event. Twenty minutes before being set to take the stage, our speaker (Sajid Javid) resigned from the Cabinet. Few moments in life will match the exhilaration in being surrounded by a troupe of journalists as the Government began crumbling. It was the Westminster circus on go – and I had a front row seat to the entire performance. 

A quiet moment of introspection soon reveals the extent of my growth this year. I first arrived as a fairly naive teenager indulged in a lifetime of his mother’s cooking and lavender-scented pillowcases. Now I stand before you, an independent young man with a quiet confidence in his ability and a marked optimism about the future.

I’ll always maintain a soft spot for the ASI for how they treated me. Since joining I have felt nothing but respect, trust, and above all else, being a valued member of the team. My patron saint once exclaimed there was no such thing as society, which now I begin to doubt. What I have felt at the Adam Smith Institute is a close-knit community bonded together by a solemn fondness like that of a family. When even being sat in the office in complete silence (which as any team member would confirm, is a rare phenomenon), you can’t help but feel that you are part of a mission much bigger than your mere self.

The past nine months have been an enlightening time where I have learned much about the world and myself. With the Institute bustling with talent, flair and passion, the ASI is well-positioned for an immensely successful future. 

I do not know when I’ll be next at the ASI. Whether soon or in years to come. But one thing for certain is that returning will always feel like greeting a long lost relative. 

It's called the market George, the market

George Monbiot has a solution to the lack of democracy he perceives in the current political set up:

Society is a complex system, and complex systems can never be sensibly and benevolently controlled from the centre. A centralised, hierarchical system means concentrated power, and concentrated power favours concentrated wealth. Systems like ours are easy for billionaires and their media empires to co-opt.

The human urge to take back control, loudly promised by governments that have done the opposite, is real. To a far greater extent than has been permitted in our recorded history, we should be allowed to manage our own lives.

All of this is entirely true, of course it is. But he then goes on to suggest that the complex system should be controlled by politics - just local politics. The actual answer is that the system shouldn’t be controlled by anyone as no one is able to control it. That is, leave as much as is possible to markets, using politics and governance to do only those things which absolutely must be done through that process.

Unlike classical anarchists, Bookchin proposed a structured political system, built on majority voting. It begins with popular assemblies, convened in opposition to the state, open to anyone from the neighbourhood who wants to join. As more assemblies form, they create confederations whose powers are not devolved downwards but delegated upwards. The assemblies send delegates to represent them at confederal councils, but these people have no powers of their own: they may only convey, coordinate and administer the decisions handed up to them. They can be recalled by their assemblies at any time. Eventually, in his vision, these confederations dislodge the states with which they compete.

No, really, just leave people be to do as they wish. Their interactions then become the system itself.

For, given that we’ve all accepted the predicate, that complex systems cannot be controlled from the centre, why are we then arguing about how that centre should be constituted which cannot, by definition, manage that complex system?

The answer is, instead of complaining about the selection method of the managers, to simply stop the management.

Finally Some Good News About Child Care

With the final refinements of this article complete, I reclined in my chair with a wry smile. The clock positioned imposingly above the desk confirmed my mission was a success: finishing before the workplace’s adjournment at 5:30. Thirty minutes later and the Government was collapsing.

Needless to say it was unfortunate timing. The speaker at our monthly ‘The Next Generation’ event was now, well, no longer in a job – making things quite difficult as he was set to take stage within the next twenty minutes. But also now it meant the gaze of public attention was casted far from an article on child care deregulation written by a nineteen year old policy wonk. But with the real worry that by the time this article was posted the children which were intended to benefit from it would have begun sprouting facial hair and socialising over a bottle of raspberry-flavoured vodka at the local park, I am much relieved in a degree of political clarity being restored. 

Amidst all the recent carnage with the leadership election, there is some timely news for families. The Department for Education (DfE) has finally come forth and provided solutions to fix the ‘broken’ child care system. 

Faced with some of the highest costs in Europe, new-time parents are regularly required to fork out a higher proportion of their income on child care costs than their mortgage. As was expressed in our briefing paper ‘Pulling Out All the Stops: How the Government Can Go for Growth and Cut the Cost of Living’, this is primarily due to child:staff ratios in the United Kingdom – that being the number of infants each individual child care worker can look after – being some of the most stringent in the world. With an estimated 77% of child care costs going towards the overheads of care centres, relaxing the burdensome child:staff ratios will allow this cost to be spread across a wider population, and so reduce the amount paid by each individual family. 

Needless to say we weren’t overly optimistic. The Government has so far addressed the cost of living crisis with the quiet stolidity of a taxidermied moose. Yet by no means were we the lone patron genuflecting at the deregulating altar. The Centre for Policy Studies and CapX’s Deputy Editor, Alys Denby, has been rallying the cause in all corners of discourse, including a scathing piece in the New Statesman which concluded ‘I thank Boris Johnson for trying to tackle this problem. After all, if he can have seven (or eight) kids, why shouldn’t a professional childminder look after a few more?’

In hindsight our worries proved unfounded. The DfE indeed have shown their capacity to listen, recently deciding to relax child:staff ratios for two year olds from 1 to 4, to a now looser 1 to 5. Meaning one staff member can now look after an additional child from what they could previously.

Irrespective of our recommendation being watered-down further than the Pimms served at a sixth-form prom, we greatly welcome the direction set out upon. Strict child:staff ratios are a poor method of mandating quality within care centres, with one study finding that ‘variations in [child:staff] ratios have small, if any, associations with concurrent and subsequent child outcomes’. They have also been seen to bring undue harm through forcing families into using cheaper alternatives, such as non-relative home care, which has been found to regularly fall short of that given by a care centre. 

Relaxing child:staff ratios has proven itself as the surest way to reduce child care costs. An investigation into such ratios found that loosening by just one child is estimated to reduce cost by 9-20%. The Government have taken a more modest line, predicting that their change will bring a £150 reduction in costs for families each month. A sizable amount amidst the troubling times we find ourselves in, with the squeeze on household incomes currently the worst in three decades. 

And yet, the Government must still go further. Bringing our child:staff ratios inline with that of Austria and Portugal (currently pegged at 1:7) would offer further relief for families, and lift a real burden off the back of many who find their pockets cash-stricken.

The relaxation of child:staff ratios appears as a repressed memory of how a policy ought to be – employing reason, rationality, and above-all-else common sense in solving the problems facing the nation. It has a proven track record of success and gives little reason to be feared. The next Government, whatever form it may take, would be well-advised to maintain this momentum and loosen child:staff ratios still further.

It is always, but always, a cost *and* benefit analysis

Leave aside whether we believe these numbers or not.

The US has inflicted more than $1.9tn in damage to other countries from the effects of its greenhouse gas emissions, according to a new analysis that has provided the first measurement of nations’ liability in stoking the climate crisis.

The huge volume of planet-heating gases pumped out by the US, the largest historical emitter, has caused such harm to other, mostly poor, countries through heatwaves, crop failures and other consequences that the US is responsible for $1.91tn in lost global income since 1990, the study found.

Firstly, we need to know whether that is in fact a large number or not. The study covers 1990 to 2014. A reasonable estimate (not accurate by any means) is that the US economy is a $20 trillion a year one. The global economy over that period a $75 trillion a year one. Over 24 years that’s $500 trillion (rough numbers!) or $1,800 trillion. The damages are thus 0.4% of the US economy over the time period, or 0.1% of the global one.

It’s possible to start the argument back by noting that these are not really material numbers.

We then want to know what is the cost of stopping this near immaterial damage and that’s a big enough shouting match that we’ll leave that one aside for today.

But the really big thing is that it should always be a cost and benefit analysis. Has the existence of the US in the global economy been worth 0.1% of that economy over that quarter century? Have, for example, the flood of inventions - most of the internet and much of computing stems from there after all - added 0.1% to global economic production?

We’d say, on the face of it, obviously and clearly. But that’s not quite the point we wish to make here. There are costs and benefits to everything. Therefore we need to measure, before any decision making, both in order to be able to decide. For it’s the nett effect that matters, no?

Bank independence is an efficiency move

It is, of course, possible to argue for the end of central bank independence. Returning control of money and interest rates to politicians would put both monetary and fiscal policy where it - arguably - should be, within democratic control. It is possible to argue this way because many do. It is also true that this is the argument in favour of central bank independence. That monetary and fiscal policy should not both be under the control of the politicians.

The governor of the Bank of England has stressed the importance of its independence amid criticism from some politicians about its handling of soaring inflation.

There is a simple efficiency argument here. With an independent central bank action to curb inflation is more effective. The markets - for whatever reason - believe central bankers’ efforts to control the beast more than they do those of politicians. This inflation is curbed with lower interest rate rises than is the case if all were under political control. This also extends to periods when there is no or little inflation, the precautionary interest rates against its emergence seem to be lower too.

It’s entirely possible, as above, to argue that this should not be so. That all should be singly controlled. It’s just that that’s not the way the world out here observes matters.

The populace seems to believe a central banker’s raised eyebrow more than they do the heartfelt promises of some grinning politician. And while that may not be how democracy should be viewed in theory given actual experience it’s difficult to argue against the good sense encapsulated there.

Portugal's drought reduces the fire season, not increases it

We’re getting our annual series of reports on the fire season in Portugal, Spain, Greece and so on. This is mixed in with reports of high temperatures and drought. We just thought it might be worthwhile emphasising what such reports don’t - drought reduces the fire season, high temperatures make no difference.

Wildfires in Portugal have left 29 people injured as thousands of firefighters and dozens of aircraft battle the blazes. Authorities said 12 firefighters and 17 civilians required medical treatment for minor injuries, as reported by the Portuguese state broadcaster RTP and local media. By Sunday afternoon, Portugal’s civil protection agency said more than 3,000 firefighters were tackling active blazes. The country is enduring a heatwave that is due to worsen, with temperatures expected to reach up to 43C (109F) on Tuesday. On Sunday, the EU activated its firefighting air fleet assistance programme, which allows member states to share resources to help Portugal.

Thousands of firefighters, yes, the Bombeiros here is a voluntary organisation mostly paid for by charity collections at roundabouts, supermarkets and the like. It’s also something that large numbers of adults join precisely so as to provide cover for the fire season*. For it is a fire season that comes around every year, starting right about now. There has in fact been a substantial reduction in the number of fires in recent decades. But that’s because the automatic granting of building and development permission in forests burnt down has stopped. Perish the thought but perhaps some of them used to be started in order to gain the development permission.

It’s also worthwhile understanding what drives the fire season. High temperatures don’t - scrub and forest is not notably more flammable at 43 oC than at 39 oC, so those peak temperatures of a heatwave over more normal temperatures make little difference. Wind, of course, makes a difference to the speed of spread.

The art of firefighting here is that if it’s out in the country then monitor but let it burn - it is that natural part of the ecological cycle here after all. Isolated houses and cottages will be allowed to go up with it too. It’s only when the flames threaten substantial settlement that actual fighting of it occurs.

Drought though reduces the size and intensity of any fire. For the cycle here is of rain in the winter and plant growth during that winter and early spring. By now - this mid-July - there’s been no rain for months as an entirely usual part of the cycle, the plant life is dried out and largely already seeded and dead. This produces the tinder the fires feed upon.

What produces more tinder and thus a stronger fire season is a wetter winter - the increased rainfall leading to greater growth which is by this time of the year ready to burn.

Portugal is indeed going through a drought, the reservoirs are low. But it is exactly this which leads to a lesser fire season - there’s less of that winter growth now dry and ready to burn.

It’s possible - we take no view on this - that the drought is caused by climate change. It’s equally possible that the high temperatures are also so caused, again no view taken. But the fire season is normal, the drought reduces the intensity of the fires and so, if it is indeed all caused by climate change then the net effect is a reduction in the damage done by forest fires, not an increase.

Which isn’t something that the more general press coverage of the issue tends to suggest now, is it?

*An estate agent once apologised for a delay in concluding a transaction, saying that he and his entire office had been out helping to deal with this. That’s what happens, community mobilisation - the supermarkets had systems whereby shoppers could purchase bottled water for the firefighters in the same way that food bank collections are made.