As we've said, people aren't thinking here
The Lancet has another of those reports about how climate change is going to murder us all in our beds. There’re the usual mistakes - counting heat deaths but not lives saved from cold and so on - but this rather stands out for us:
Simultaneously, the changing climate is affecting the spread of infectious diseases, putting populations at higher risk of emerging diseases and co-epidemics. Coastal waters are becoming more suitable for the transmission of Vibrio pathogens; the number of months suitable for malaria transmission increased by 31·3% in the highland areas of the Americas and 13·8% in the highland areas of Africa from 1951–60 to 2012–21, and the likelihood of dengue transmission rose by 12% in the same period (indicator 1.3.1).
As we’ve said before this is all at the same time as official policy is to expand wetlands, so as to give mosquitoes more places to breed more often and for longer. Again as we’ve said before the Somerset Levels, the Fens, malaria was endemic in both of them. Something solved by draining them at least in part. Now, as the dangers rise we’re to flood them again.
Someone’s not thinking here and it’s not us.
This sounds remarkably wonderful
That society has a safety net is both obvious and wondrous. That folk don’t need to depend upon it is even better:
New green farming subsidies are failing to attract large numbers of farmers, who are instead focusing on food production.
Just 1,000 farmers are signed up to the most basic part of the new £2.4 billion environmental land management scheme (Elms), which will replace the old EU-style subsidies.
The number of farmers signed up to the scheme, which opened in June, is just 1.6 per cent of the Government’s target of participants by 2028.
So there is some scheme to make sure that farmers are not reduced to having to eat their own turnips. Great, we’ve no problem with that safety net. We also insist that it’s even better that very few of them seem to require - except as that insurance - that safety net. They’ve more productive things to be doing with their time and assets. Wondrous.
Except, of course, people are complaining about this. Plans are afoot to increase the sign up. Which is ludicrous.
Think on it. We have unemployment pay to provide a safety net to those who can find no productive use of their time and assets. It’s righteous that we should have such. But we measure success by how few people need to depend upon that, not by how many. We most certainly don’t go out to improve society by insisting that more should qualify for unemployment pay.
Yet here they are, complaining that farmers are being productive by producing food. Then insisting that they must stop doing that, immediately, and live off taxpayer handouts instead.
But then we’ve long remarked on the Establishment’s ability to firmly grasp the wrong end of that ordured stick.
We do seem to have a certain problem here
Those politicians who we depute to deal with international trade for us seem not to know what international trade is, its point nor its purpose. This is indeed a certain problem - for what’s the point of deputing policy making to those with no grasp of the subject under discussion?
Britain’s trade deal with New Zealand risks opening up its beef, dairy and sheep-meat producers to cheaper imports with few compensating benefits, a Commons report says.
The cross-party international trade committee has raised concerns over the elimination of tariffs on New Zealand goods under the free trade agreement, and has called for an analysis of the potential risks to the UK’s food security.
The MPs questioned whether the government has fully considered the “pros and cons” of liberalising tariffs given that its own impact assessment predicted the UK’s agriculture, forestry, fishing and semi-processed food sectors could contract from the increased competition. New Zealand’s beef, sheep-meat and dairy products are generally cheaper to produce.
As Adam Smith pointed out the purpose of all production is consumption. As can be derived from that - and from other logical chains - the point and purpose of trade is the imports. For it is the imports that we get to consume, exports being what we must labour over for other people to consume.
Which is what makes these complaints entirely and wholly barking. For those complaints are that Johnny Foreigner might produce food more cheaply than we can. Therefore we will be able to eat cheaper than if we relied solely upon our own stout yeomen. This is the complaint recall.
The discussion entirely ignores the compensating benefit that we become richer by having this deal. Which, given that the aim of having an economy, heck a civilisation at all, is to make us all better off seems to be rather a blindness in the political vision, doesn’t it?
Now, it’s true, we do rather come from the Continuity Neoliberals part of the spectrum but this isn’t (despite the way we talk of “trade preferences” in this field) a matter of preference or political shading. This is just a simple matter of fact.
The point and purpose of trade is to get our hands - or gullets - on those imports. So to argue that gaining access to cheaper food has “few compensating benefits” is to betray a profound ignorance of the basics of the subject under discussion.
There is much both chortling and agonising over the “Whither Britain?” question currently but we do think that the outcome is going to be rather better - whichever pathway is chosen - if Parliament were rather more heavily stocked by those with at least a vague understanding of the facts.
That’s not too much to ask, is it?
If only Open Democracy could actually grasp numbers
It really shouldn’t be this hard for people to grasp basic concepts. Open Democracy tells us that there are horrors, that we must have rent controls - that best way to destroy an urban environment short of aerial bombing - and eviction bans and PANIC!:
Statistics on private rents published on Wednesday by the Office for National Statistics show rents are rising at their fastest rate since records began, with tenants facing a 3.6% increase.
They’ve managed to quote correctly at least:
Private rental prices paid by tenants in the UK rose by 3.6% in the 12 months to September 2022, up from 3.4% in the 12 months to August 2022.
Growth in average total pay (including bonuses) was 5.1%, and growth in regular pay (excluding bonuses) was 4.7% among employees in April to June 2022.
Rents as a portion of income are actually down a couple of percent. Further:
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 8.8% in the 12 months to September 2022, up from 8.6% in August and returning to July’s recent high.
Real rents, rents adjusted for the general inflation rate, are down around 5%.
Rents falling as a percentage of income, rents falling in real terms, these are not the sorts of things which should spark a panic and the imposition of rent controls now, are they? Except, of course, if you’re from the end of the intellectual spectrum that finds basic concepts too difficult to grasp. Or, perhaps, assuming that the reading audience is and deliberately hoping to confuse.
We can even go further with these numbers. Nominal wages have risen by less than the inflation rate, therefore real wages have fallen. Nominal rents have risen by less than both inflation and the rise in nominal wages. Therefore real rents have fallen more than wages have. Renters are thus better off.
Numbers really aren’t this hard to grasp. No, we assure the arts graduates, they’re that not difficult.
Dr Doom's doom-loop
Nouriel Roubini tells us that one of the big problems hurtling down the pike at us is that the robots are going to steal all the jobs. This is not, in fact, a problem:
Continuing on this path, though, is also bad. Crikey, Eeyore. His chapter on AI is rather by-the-numbers, but it does the job. His first point — that the machines are coming for your jobs, and being educated and middle class is no escape — seems undeniable. His second point is that this “may cause capitalism to eventually self-destruct”. Although not in a good way, if you’re into that sort of thing. He cites a perhaps apocryphal exchange between Henry Ford and the union boss Walter Reuther. “Ford asked Reuther how robots will pay union dues,” he writes. “Reuther replied, how will Ford get them to buy his cars?”
In other words, AI and automation turn capitalism into a vampire parody of itself, preventing the majority from being rich enough even to make the rich richer. The only plausible solutions involve massive amounts of taxation at the top, but that will be a fight. And even then, we will have to figure out how to keep the vast bulk of humanity doing nothing worthwhile, for ever, without going mad or getting depressed. “If we squabble long enough,” he writes, “computers may get to decide how to divide the economic pie. By then, let’s hope they have empathy.”
There is that William Nordhaus paper doing the actual maths here which shows that if this does happen then real wages rise by 200% a year. Not, we think, a grand problem.
It’s also possible to approach this in a more classical manner. Using, say, Adam Smith and Karl Marx - both considered classical economists. From Smith we gain the insight that the purpose of all production is consumption. Or, to consider that, it’s consumption that is the aim, production merely the means of gaining it.
OK, so the robots make everything. They take all the jobs. So what?
We out here, we non-capitalists who don’t own the robots, what about us? Well, either we gain access to the production of the robots - we get to consume it - or we don’t. If we don’t then we still have to produce all of the things that we non-capitalists do get to consume. Because we’re not gaining access to the robot production and therefore can’t consume, therefore we must produce in order to consume. Nothing has changed that is. Or, the alternative, we do get to consume that robot output. In which case what’s the problem? Production happens, consumption does, there’s no problem, is there?
That is, if the robots don’t take all the jobs then the world is as it is right now, if they do take all the jobs - all of them - then it’s not a problem. So, it’s not a problem, is it?
We can add Marx into this mix. His actual prediction - no, not what generations of acolytes and groupuscules have misunderstood - is that true communism will be possible once capitalism has become so productively efficient that it has abolished economic scarcity. That is, when the machines are making everything without having to worry about human labour, that’s what allows us to be a farmer, hunter and philosopher all in the same day. Because it doesn’t actually matter how we spend our time nor the efficiency with which we do so because everything we desire is being made by said machines.
That true communism being dependent upon the robots coming to take all our jobs.
By the way, the reason that Marx and Smith agree here is that the economics that Marx got right he lifted from Smith - another proof that all of economics is either footnotes to Smith or wrong.
If the robots solve economic scarcity then none of us need jobs. If the robots don’t solve economic scarcity then we’ve all still got jobs. There is no problem here.
We do so love the logic here
This is Jonathan Freedland walking out the idea for a trot but this is widely used out there at present:
Truss has discredited high-octane, free-market economics - perhaps for ever
Given our own position as paleo-neoliberals we’d argue with that - true neoliberalism has never been tried. Hey, why not use that argument, seems to work for socialists everywhere?
But put that aside, what really interests here is the proof that is being used, the clinching argument to show that markets don’t, in fact, work:
The financial markets recoiled
Using - as is being done here and again we’d argue with it, the gilts market problem was one of liquidity and collateral, not a more basic one about economic direction - the market reaction to show that markets don’t work doesn’t, umm, work.
If we are to accept the verdict of the financial markets then we are assuming that markets work. Because only if markets do work should we accept the information stemming from market responses. If markets do not in fact work then what the financial markets say about political policy is irrelevant. The Gnomes can bluster in their bunkers and politics doesn’t have to pay any attention.
What we can’t do, as a matter of basic logic, is insist that markets do work in passing a verdict upon policy but also that markets do not work. So, which is it? Markets tell us the truth or they don’t?
And if markets do work in processing information - the claim being made - then we should be using markets to discover and process information then, shouldn’t we?
On that HS2 subject again
There is a certain logical puzzle to these twin announcements:
The Telegraph revealed this month that senior rail industry figures believe that despite recent strike action, 97pc of travellers are back on the rails compared with 2019. But they are travelling less frequently and less during peak hours.
This means the post-pandemic propensity for people to work from home has blown a £2bn hole in rail industry finances – a shortfall that falls on taxpayers due to the end of franchising.
A spokesman for the Department for Transport said: “We will not be increasing fares as much as the July RPI figure and we are further delaying the increase to March 2023, freezing fares for passengers for the entirety of January and February.”
Consumer habits are changing, this is reducing the call on capacity of the railways. The finances of the railways depend, heavily, upon capacity utilisation - vast fixed costs and low variable costs will do that. So, the real price of rail travel must be reduced in order to increase capacity utilisation.
Whether we like this or not isn’t the point, we’re fine with it as a piece of logic. But this is accompanied by this:
Jeremy Hunt on Wednesday night committed to building the HS2 rail link between London and Manchester despite calls for it to be scrapped to help balance the books.
That is actually the next sentence of the report. We can grasp the logic being used here. Capacity utilisation is so high that a further £100 billion must be sprayed over the countryside in order to increase that capacity.
Whether we like this or not isn’t the point, we’re fine with it as a piece of logic.
Where our confusion appears is that politics seems to be insisting that both are true at the same time. Capacity utilisation is so low that prices must be reduced. And also that capacity utilisation is so high that capacity must be expanded. It’s true that we do have a new Queen (Consort) but that impossible combination is something we find difficult to choke down before breakfast.
It’s been said over the decades that we here at the ASI don’t understand political reality. To which our stock answer has long been but it’s politics that seems to have the problem with reality.
We must expand railway capacity because railway capacity is being underutilized. Alice and her drugs have nothing on that as logical proposition.
Time to abolish the Advertising Standards Authority
Some decades back Bernard Levin lauded the actions, the very existence, of the Advertising Standards Authority. There was a case where one of the crisps companies - Walkers, Smiths perhaps - used the tagline of “Britain’s Crunchiest Crisps” or some such. Another crisps company - Walkers, Smiths perhaps - complained. The ASA ruled that as there was no proof of crunchiest then to assert a fact which was not known to be a fact was in breach of the advertising regulations.
Levin lauded this not so much because having prodnoses determining advertising was wondrous but because of what else this told us about British society. We’d solved all the big problems - which to a large extent we had and have - like poverty, destitution, homelessness, war ravaging the domestic landscape and so on. Therefore we had the resources to place that little slice of cherry on the icing of the societal cake - concerning ourselves with irrelevant claims made by crisps manufacturers.
We now need to abolish the ASA:
HSBC has suffered a fresh blow to its green credentials after the UK advertising watchdog banned a series of misleading adverts and said any future campaigns must disclose the bank’s contribution to the climate crisis.
The ruling by the Advertising Standards Authority (ASA) followed dozens of complaints over posters that appeared on high streets and bus stops in the lead-up to the Cop26 climate change conference in Glasgow last October.
The watchdog said the adverts, which highlighted how the bank had invested $1tn in climate-friendly initiatives such as tree-planting and helping clients hit climate targets, failed to acknowledge HSBC’s own contribution to emissions.
“Despite the initiatives highlighted in the ads … HSBC was continuing to significantly finance investments in businesses and industries that emitted notable levels of carbon dioxide and other greenhouse gasses. We did not consider consumers would know that was the case,” the ASA said. “We concluded that the ads omitted material information and were therefore misleading.”
That’s not a simple ruling upon fact. That’s moving over into censorship of opinion. Therefore we need to remove the people who are able to censor in that manner.
The problem is not, in fact, the existence of the power to censor advertising. It’s that the power has existed for some time. For what happens to any such organisation is that whatever the original goal or strictures upon the deployment of power the existence of the organisation will attract those who wish to both deploy and extend that power. We find ourselves in a Mr. Creosote world, where there is that urging for just the one more, wafer thin, mint. Before, of course, the system explodes in a welter of viscera.
Once an organisation has soured like this there is no hope of reform - precisely and exactly because those who populate it are there so that they gain this power over society. Thus abolition is the only useful action.
There is, after all, a considerable difference between insisting that “as you have not proven “crunchiest” you cannot claim “crunchiest”” and “you must acknowledge your historical guilt before you may say anything”. The ASA has crossed that line - Goodbye ASA.
Ceteram censeo ASA esse delandam.
Always optimise for the scarce resource
It’s a fairly basic idea - a pre-economic one really - that we should always optimise for the scarce resource. Gold, for example, is expensive, so the plating on connectors in computers has gone from perhaps 200nm to 2nm over the past four decades of the personal computer’s existence. We use less gold - which is expensive - to make each computer these days, we have optimised for the scarce resource.
Meat is expensive, every society has a standard carbohydrate sludge to accompany it to fill bellies by optimising for the scarce resource. Human lifetimes are limited thus we desire that things be done faster so we can fit more of them in to our three score and ten - we optimise for that scarce resource.
This is not economics telling us we should do this, this is economics observing that this is what humans do.
At which point: William Hague:
Ideology is dead: it’s competence we need now
Talk of tax cuts and the size of the state should give way to pragmatic plans for education, business and the NHS
We’re not aware of any shortage of ideology. We are not aware, either, of any over-abundance of competence in the political classes. That’s about as mildly as we can put it.
There is that Hayekian point that the centre never will have - cannot possibly have - the information necessary (or, for completists, be able to process the data it can’t get into useful information) to approach competence in managing a society or economy.
There is also the rather milder point that selecting those managers by who kisses babies best is unlikely to be selecting for said managerial competence.
All of which is, of course, ideology. The reason the state should do less is because the state, as directed by politics, is not good at doing things. The advantage of this as an ideology is that it’s clearly factually true as well as merely being a worldview.
Hague’s insistence seems to be that we should use more of what we’ve not got and less of what we do. This is as with insisting we should up our intake of steak and lobster, economise on potatoes, in order to make our diets cheaper. Or, to plate those computing connectors with trilithium, or unobtanium - useful tricks in science fiction but not wholly sensible in this ‘ere reality.
Setting up the system to use more of what we’ve not much - if any - of just isn’t the way to do things.
Immigrants, they get the job done
The Government needs to rethink and improve their immigration plans to a more liberal system which reduces restrictions and allows a more free movement of migrants.
The UK has notoriously hostile immigration policies. This is hardly surprising for a Conservative government, but their hostility towards migrants were exacerbated during Theresa May’s tenure as Home Secretary: pledging to fulfil Cameron’s manifesto policy to reduce net migration by ‘tens of thousands’. This included the introduction of the Right to Rent Scheme and cutting fundamental services (including the NHS) to illegal immigrants. Since then, the Government has continued to commit to hostile immigration policies: restricting illegal immigrants in ways which have been unduly detrimental to legal asylum seekers and reducing low skilled migration.
Earlier this year, the UK introduced a points-based immigration system which required migrants to have a total of 70 points to be able to work in the UK. The characteristics however are unreasonably stringent and make it excessively difficult for ‘low skilled’ workers to migrate to the UK. Such characteristics include, for instance, having a relevant PhD, having a salary of at least £25,600, meeting English speaking requirements, having a secure job offer in a ‘highly skilled area’ and so on. At Conservative Party Conference, Suella Braverman made a speech in which she pledged ‘to deliver the kind of migration that grows our economy’ and believes the way to do this is by ‘not relying wholly on low skilled foreign workers’. It seems therefore that the Government will continue in their aim to reduce low skilled immigration.
One of the most fundamental problems with this commitment is largely a result of the misconstrued economics behind their policies. The Government continuously declares themselves as a pro-growth party, but their dedication towards reducing the number of low skilled migrant workers is only restricting their ability to fulfil this. This is because low skilled migrants are needed to fill employment gaps. Despite there being a plentiful number of jobs available, due to the mismatch between these vacancies and the jobs people are looking for, these roles are not being filled. Persistent employment gaps can be hugely detrimental to the economy. This is partly a result of the increased wages firms have to offer to attract workers into these vacancies, ultimately leading to increased business costs which are then passed onto the consumer through higher prices. This then leads to less consumption in the economy as people restrict their spending, leading to economic contraction – going against the Government's initial aims to generate growth. As reported by the Financial Times, ‘UK businesses expect to raise their prices at the fastest pace since records began to offset higher wage costs driven by a tight labour market’.
Despite these concerns, the Government continues in their justification that by creating a gap in the labour market, wages of workers will rise as companies compete for scarce labour. As a result, business costs will surge and companies will be incentivised to invest in capital rather than labour, thus increasing productivity. However, this assumes that all companies will be able to adapt to inflated wages and act accordingly. In reality, this is not the case. With soaring energy costs, supply chain problems and an increase in inflation, many companies no longer have the ability to pay employees higher wages. At best, this negatively impacts a company's ability to meet output demands and at worse, makes firms go bust. With these risks, businesses are less likely to invest, despite the government’s initial conceptions that with higher business costs, investment will increase. In addition to reduced investment, as firms go bust, job losses will become inevitable and consumers will face significantly less disposable income. This again will lead to a reduction in consumption in the economy. Once more, even when firms have the ability to invest, in certain sectors of the economy such as childcare, investment into capital isn’t cost-efficient as such jobs are difficult to automate. Thus the Government’s assumption that all firms will choose to innovate when wages increase is flawed.
Moreover, in addition to price increases, job vacancies damage the economy as low skilled workers complement higher skilled workers. By complementing the existing workforce, low skilled immigrants allow for a more effective, functional economy. One such example of this complementarity is ‘the nanny effect’ – this is that low skilled workers provide childcare and house care services such as cleaning which allow high skilled workers the opportunity to return back to work after childbirth. Thus, where there are low skilled immigrants present, more high skilled workers can return to their roles in the labour market.
It is clear therefore that low skilled immigration isn’t as detrimental to the economy as the Government makes it out to be- and the only benefit of introducing such anti-growth policies is because they believe it is what the British public want and thus, what will keep them in power. However, even this seems counterintuitive, particularly as statistics show a warming of public attitudes towards immigration. In fact, support for reducing immigration is at the lowest it has been since 2015 with only 4 in 10 people in the general public preferring a reduction in immigration. Moreover, latest findings conclude that 46% of people believe that immigration has had a positive impact on Britain, in contrast to a mere 29% of people believing it has had a negative impact.
The Government ought to understand that, however politically controversial they deem immigration to be amongst the electorate, there is no denying that it brings economic benefits. Now that the public don’t have particularly negative views on immigration, rather than pursuing a policy that reduces long term growth and living standards, the Government needs to rethink and improve their immigration plans to a more liberal system which reduces restrictions and allows a more free movement of migrants, including low skilled migrants. It would also be economically beneficial for the Government to better communicate the benefits of free movement to the British people rather than blaming migrants for Britain's economic downfalls, this in turn will further reduce people’s support for hostile immigration policies and thus will support economic growth aims.