Striking at the heart of the British state

Not that we really do think that reform of the House of Lords would be a strike at the heart of that British state. But the principle, if more widely applied, would be:

Previous prime ministers have made liberal use of their unrestrained powers of patronage,

Well, yes.

…something must be done to stop prime ministers being able to pack their numbers with cronies and donors,

Quite possibly so.

….is heavily dominated by those with political connections.

Quite so.

So, what do we do to stop the quangos, the Arms Length Bodies, from being run by those selected in such an obviously absurd manner? Those are the bodies with the real power in our state structure so how do we rid ourselves of the cronies, donors and those with no merit - to be very liberal with the meaning of that word “merit” - other than their political connections?

Our preference would be to not have the quangos, the ALBs. If something’s not important enough to be run by someone elected - which means we can throw them out - then it’s not important enough to be done by government. For part of that social contract which leads to the idea of government is that we can throw them out as and when we tire of them. That being, as PJ O’Rourke pointed out, at the next opportunity to do so among the sensible.

Quangos and ALBs produce a level of government that we cannot throw out - therefore, in the name of that sacred democracy we must get rid of them.

Of course, this is all entirely obvious to any thinking person but we promise that we’ll have some actually radical ideas later in the year.

Get Xi Jinping on the phone - "Quick, send more munnies!"

The Sunday Times - driven, we think, by some of the economic nationalists - is worrying about Chinese state investment in Britain. We’d suggest that we here in Britain are on the correct end of one of the great bargains in all history here - if we judge by the figures the Sunday Times uses that is. So rather than worrying about this the correct action would seem to be to call up and ask for some more.

The claim is, firstly:

The updated list, published today, puts the UK assets held by the Chinese state at £45 billion and the total held overall by Chinese and Hong Kong investors at £152 billion.

£45 billion for the state is a big number. Except, well, it isn’t. UK household wealth - which is what we all own in aggregate - is around the £15 trillion mark. Roughly and aroundandabout half of that is financial assets, the vast majority of which is inside pensions. So the Chinese state owns perhaps 0.6% of Britain’s financial assets.

Ooooh, scary! Or, of course, close to a rounding error.

But the S Times goes on to tell us something even more scary too:

Taking account of dividends paid out by Shell, BP and other stock market-listed firms, it easily takes the payments back to the Chinese state above £1 billion over the past five years.

So, £200 million a year then. On a £45 billion investment pot. A 0.44% yield. The 30 gilts yield is around 4% at present. So, roughly and aroundandabout, it seems that we can borrow from the Chinese state at one tenth of the rate that our own government can borrow from the markets in general.

Now yes, that ignores any capital appreciation and looks only at yields. It’s also not true that companies listed in London necessarily have much to do with the UK economy and even, well, UK financial assets do not belong to us, the nation, but to whichever individuals happen to own them.

But think like those economic nationalists are asking us to do. China has perhaps 0.6% of us and we’ve got to pay one tenth of the rate that we charge our own government. We get their money at an absolutely bargain price that is.

The claim is then made that of course we’ve got to stop this economic rapine by dastardly foreigners. The correct reaction is to ‘phone up Xi Jinping and shout “Quick! Send more munnies!”

There is no case for slavery reparations

We have pointed this out before but the idea seems to still have legs. This idea that people now owe compensation, reparations, to those in the New World who are descendants of those enslaved and transported there.

Barbados is trying to collect on such a promise - or perhaps construct the argument that such a promise should be made. Lionel Shriver runs back with the usual arguments against.

There is a much, much, simpler point to be made. So, make it again we shall.

With the possible exception of poor, benighted, Haiti - the poorest place in the Western Hemisphere - those transatlantic descendants of those enslaved are better off than the descendants of those not enslaved in West and Southern Africa.

We agree, slavery was vile. Yet the net effect of that movement of peoples, on people alive today, was to make better off those descendants of those enslaved. This is not something that compensation, reparations, can be paid for.

No, we are not trying to justify slavery through this argument. No, the suffering then is not compensated for by the position now. Yes, it was a moral outrage and so on - we agree with all of the criticisms of the acts themselves. And yet the impact upon the economic lives of those here with us today was beneficial. Which isn’t something that can be compensated for.

Which is, as far as we’re concerned, the end of that argument.

We do indeed agree that this current world is not perfect, that things both can and should be done to make it better. Things we should do precisely in order to make it better for all of us - without regard to creed or colour.

As Robert Wright points out, peace, easy taxes and the tolerable administration of justice would be a good start. As was pointed out a generation before the end of the slave trade, two generations before the end of slavery. So, about time we got on with it perhaps?

So, just how would GOSBRIT handle this?

Imagine a slightly different history where the Fabians actually won. Those early years Fabians, Wells, Shaw, the Webbs, their belief in the efficiency of proper scientific socialism and planning. We’d have had GOSBRIT to sort things out for us. Then add in a bit of real history:

Ukraine and Russia are major suppliers of sunflower oil and the invasion caused serious shortages. Many shoppers and manufacturers started buying vegetable oils in the place of sunflower oil, creating a domino effect of price rises.

“[The war] had a huge impact on sunflower and the wider vegetable oils market, pushing up prices in alternative vegetable oils such as rapeseed and soybean,” says Gary Lewis, chief executive of KTC Edibles and president of the National Edible Oil Distributors Association (NEODA).

As economists like to point out everything is both substitutable and also, by that definition, itself a substitute. So a sudden shortage of sunflower oil has those knock on effects upon soy and rape. But also upon olive oil. And, well, butter (in French cooking perhaps) and lard (in British) can also be such substitutes. Some will look at the price of any of those and have mash instead of chips, or baked. Or even substitute away from potatoes entirely to rice or quinoa. Or - well, it’s complex, isn’t it?

So, how does GOSBRIT deal with this? We can’t use prices because we’ve already decided to use planning. How is the calculation done of what to produce now that there’s that sunflower lack? Then comes the problem of actually communicating that change in production to the producers - then the further and more difficult step of informing the consumers of what they should be using.

Well, yes, it doesn’t really work, does it? Precisely because everything, but everything, is a substitute we’ve got the one change in one part of the economy and the entire national plan has to be changed. In real time. It’s not even our economy, our plan, that has changed to require the recalculation.

Now consider that part of the economy where the Fabians did actually win - health care. The NHS is run by GOSBRIT without the use of prices or markets, but by bureaucratic dictat according to the plan.

Yes, yes, we’re quite prepared to agree that health care is more important than sunflower oil. But that’s precisely why we shouldn’t be using scientific planning there, isn’t it?

So which resources are you trying to save then?

It isn’t correct that the French get everything to do with food right:

Fast-food chains in France are preparing for one of the biggest changes to their restaurants in decades as the government bans disposable plates, cups and tableware for anyone eating or drinking on-site.

Chains such as McDonald’s, Burger King, Starbucks and Subway are facing what environmentalists have called a “revolution” on 1 January as pioneering new measures come into force in France to combat waste.

Much of the fast-food industry uses an economic model built on throwaway boxes, cups and packaging which customers tip from their tray into a bin straight after eating.

Under the new rules, any restaurant with more than 20 seats – including work canteens, bakery chains, fast-food and sushi outlets – will have to provide reusable, washable cups, plates, dishes and cutlery for customers eating in.

Combatting waste is a synonym for that saving of resources which is so important these days. You know, that walk more lightly upon this Earth and all that.

Except, well, which resources?

Less paper will be used this way, we’re sure. Less polystyrene perhaps. And more energy - no one is going to be using cold water plate washing techniques, or at least we hope not in a commercial environment. And more human labour, obviously - we’ve been there, done that, washing up requires more labour than rolling up paper for the bin.

So, which resources is it that we’ve scarcity of? Well, obviously, all of them, so resources use reduction depends upon a complicated blend of which we’re least scarce of in order to get the job done. So how would we do that complicated calculation?

Prices, obviously. The only calculating engine we’ve got that is fine grained and timely enough to chew through that problem for us.

And here’s the thing. Profit seeking capitalists have had a look around at prices and worked out that the least resource use is achieved - across all those resources, energy, labour, capital, machinery, usables, paper, polystyrene and the rest - by the use of the paper and other disposables.

Apparently the bureaucrats know better. Well, no, they don’t, because they’ve not asked, let alone answered, the one important question here. Which is “Why did fast food settle on the system it has?”

Having not asked that one important question they then insist, by law, on a system which uses more resources in order to save resources.

We’re not quite sure whether that’s a commentary upon bureaucracy or France but we are sure that it’s not the right way to be doing things.

The Stern Review tells us not to do it this way

There’s little point in our having 1200 page reports about something if everyone’s then going to ignore the central lessons of that report.

Note that we don’t say findings. The Stern Review, for example, makes a number of “should” statements. Should is always arguable. But there are also simple statements of fact in there. At which point, trying to agree with those “shoulds” while also attempting to dismiss those facts, that becomes a significant problem. As is being done here:

“You can’t think that you solve the climate crisis and then attend to racial justice or racial discrimination,” Achiume said. “What you have to realise is that every action that is taken in relation to ecological crisis – environmental, climate and otherwise – has racial justice implications, and so every action becomes a site of undoing racial subordination.”

We’d dispute the entire concept of racial subjugation. But let us follow the logic being employed here a little more:

After Achiume’s final report was filed to the UN general assembly in October, delegates at the Cop27 climate change summit in Egypt agreed to a loss and damage fund to help underdeveloped countries adapt to climate-related disasters. These provisions were a positive step, and even “a way of forcing some engagement with reparations”, Achiume said.

“I see it as a wedge, you know, a way in the door, and a way to create space, for accountability for the historic injustice that brings us to this moment of the climate crisis.”

The demand is that both climate change and also historic racial injustice be cured at the same time. This is wrong, incorrect.

Even if we assume that both exist, both must be cured, it’s still incorrect.

For one of those central points made in the Stern Review is that we must be efficient in our manner of dealing with climate change. On the very simple grounds of the most basic of economic insights. Humans do less of more expensive things, more of those that are cheaper. That’s just how the species rolls.

Dealing with that historic injustice might be that moral imperative but it’s clearly an expensive one. The request - nay demand - is for a very large sum of money after all. So, by demanding this be wrapped into dealing with climate change we are adding expense to dealing with climate change - we’ll do less dealing with climate change therefore.

By insisting that we deal with climate change in a more expensive manner we’ll do less dealing with climate change. That’s not the way to do it, no, really, Stern himself told us so.

Why blame BP for what BP does?

Or, perhaps, why blame BP for sticking to its knitting?

BP criticised over plan to spend billions more on fossil fuels than green energy

Company’s oil and gas investments for 2023 will be as much as double those on renewables

BP, as an organisation, is optimised to stick straws into fossil fuel reservoirs. Find those reservoirs, work out how to extract from them, do so then ship, refine and market the fossil fuels.

That’s simply what it does, what it’s good at.

Things like windmills, solar cells, batteries, hydrodams, tidal energy, fuel cells and on and on - they’re all different businesses requiring different skills. There’s no reason to suppose that BP is going to be any good at those other things - no more reason than thinking that Ford, or IBM, me, you or the baker around the corner are going to be good at them.

“Where you spend your money says a lot about your priorities,” said Mike Childs, the head of policy at Friends of the Earth. “It’s astounding that in the middle of a climate emergency BP is planning to invest billions more dollars on planet-warming fossil fuels than on clean, green renewables.”

Complaining that anyone is investing in fossil fuels could be wrong, sure, but it’s not a logical fallacy. That no one is investing in renewables - or not enough - equally has logical merit. But that BP, an organisation, isn’t spending on something it’s not optimised for is simply stupid.

If we do want more spent - sorry, “invested” - in renewables then we want the profits from fossil fuels to flow out of BP and into an organisation optimised for renewables. That is, BP ceases renewables investments and goes into run off - there’s no good reason why an organisation should outlive its usefulness - and simply shovels the cash out the door to the shareholders. Who then reploy that money into investments in renewables, through organisations optimised for that task.

But at that point everyone would be complaining that BP was sending money to shareholders to redeploy into the new forms of investment, wouldn’t they?

This insistence that oil companies must do not-oil is to grossly misunderstand how business works. It’s to think of it all as “big-stuff” which can just be retasked. The same logic which would have Siemens making bicycles, Airbus trains, Tesla airplanes and Raleigh the cars. After all, they’re all just transport businesses, right?

We'll venture a little prediction here

We’re told that China manages shipbuilding, that the managed shipbuilding is all to joint use standards - military and civilian - and that this gives China power over the European Union:

China’s domination of international shipping and control of key European ports would enable it to choke global trade in the event of a conflict with the West over Taiwan, an EU research paper has warned.

The paper, which draws on Chinese government documents, found that “there is a growing politicisation and militarisation of China’s civilian maritime sector” at a time of heightened geopolitical tensions.

Therefore, as sure as eggs is eggs, there will be a call for the European Union to manage shipbuilding in its turn:

The European share of shipbuilding has shrunk to 4 per cent from 45 per cent in the 1980s. The continent’s share of the global shipping fleet is down from 20 per cent to 16 per cent. EU governments ban state subsidies for shipbuilding but China has stepped up state aid.

“The pursuit of political control and security — maritime nationalism — has remained prominent,” Holslag said. “China considers maritime power as an important building block of its national power and crucial for its national economic security. China has vast maritime power. Contrary to other countries, most of its maritime assets are controlled by the state.”

Slippery slope arguments are only logically valid if it really is inevitable that the second stumble will follow the first. It is indeed inevitable that someone will start calling for the management - and subsidy - of shipbuilding within Europe as a result of this analysis.

This always does happen when a mineshaft gap is spotted. So, there’s that to look forward to in the New Year then.

Things that might be true but aren't obviously so

One of the reasons we structure science the way that we do is that there are many things that seem to make logical sense. Theories that can be floated, ideas that seem to run along entirely sensible lines. But it’s not always true that sensible and true are quite the same. So, we need to test the theories against reality. Much of science - when done properly - is in constructing the experiments to try to disprove the idea being floated. Also, the mark of good science is that when reality differs then it’s reality that wins.

Childcare and fertility rates is one of those things:

Affordable childcare is one way to boost Britain’s birth rate

Well, could be, yes. We can all see the logical connection there. If having a child becomes less costly to those having the child - the expenses don’t go away here, of course, they’re just rather more charged across the society though the tax burden - then we might well assume that more children will be had. Given the abortion numbers we can observe that the higher fertility rate is there in potentio, it’s an active choice being made for the children not to arrive. So, yes, could be childcare, could well be.

Except there’s no actual evidence that this is so. Society 50 and 70 years ago had less of that affordable childcare than it does now. The birthrate is lower now than it was then. Looking across European countries we don’t seem to see any correlation between childcare provision in the here and now and the fertility rate.

It’s not even true that the wider issues of maternity leave, maternity pay, the gender pay gap and so on correlate with fertility rates. Among the rich countries Sweden and the US can be considered as being at the opposite ends of the policy spectrum concerning those issues and yet their fertility rates are statistically virtually indistinguishable. And no, immigration (first generation immigrants tend to bring with them their home country fertility rates) isn’t the answer as Sweden has a similar to the US rate for that too (both countries about 14% foreign born).

Childcare costs limiting fertility just seems to be one of those theories that doesn’t have any actual evidence to support it - however sensible the logical process itself.

The mistake being made by the Effective Altruists

Given the day, an examination of a moral insistence:

This is the season for giving – a time when charities call for donations and the gulf between the haves and the have nots becomes particularly apparent. But how much good can – or should – you do, by opening your wallet?

Such are the questions posed by effective altruism (EA), a movement thrust into the spotlight by the arrest of its high-profile exponent, billionaire Sam Bankman-Fried, after the collapse of his cryptocurrency exchange.

That a seeming charlatan coopts a moral idea is not a reflection on that idea of course, charlatans do as charlatans can get away with.

However, there’s an error - a gross one - at the heart of this effective altruism idea.

“It’s really important to give to the most effective charities,” Singer contends, “because they can be not just 10 times but hundreds of times more impactful in what they do.”

The same utilitarian logic means the EA site 80,000 Hours (of which Singer is not a part) suggests supporters choose a high-paying career so they can donate more during their lifetime (a practice known as “earning to give”).

That’s where that problem is. There’s a more minor one here:

Many critics focus, in particular, on the enthusiasm of some EA advocates for “longtermism”: the argument that, because far more people will exist in years to come, maximising good means allocating a greater importance to the future.

The other way of describing - OK, one other way - longtermism is that we’re using a low to very low discount rate. If we use market interest rates then things that happen half a century out or more have very little value now. So, our actions now can - should even - disregard that half a century out and more. We should worry much more about alleviating hunger now than soil quality in 100 years’ time, more about shelter and heating for the cold now than CO2 levels in 200 years’ time - ah, you see the problem here?

We are also being told, at this very same time, that society should be using a low discount rate concerning that future in order to deal with climate change. The whole insistence of the body politic is that discount rates should be low - then people start to criticise longtermism?

Seriously folks, make up your minds.

The larger error though. The claim being made by effective altruism is that you go make the money then give it away. There absolutely is a place for charity, yes indeed (To break the collective identity here, the One Taka Meal floats my boat). But if the aim is to do the most for the most people then that’s not quite the thing to be doing. Growing a business that makes a profit is.

No, bear with us. Think of Schumpeterian Profits in the American Economy. Of the value created by entrepreneurial activity some 3% or so sticks to the hands of the entrepreneurs. On average, across economies and time of course. The vast majority of that value created flows to consumers in the consumer surplus they enjoy. That creation of the new or more efficient - which is what entrepreneurialism is - leads to consumers being able to have more than without that new and or efficient. They’re better off.

Two examples, as Jason Furman pointed out about Walmart the benefit to American consumers of the simple existence of the stores is some $263 billion a year (2005 numbers). The net present value of that might be around the $5 trillion level. That the inheritors of Sam Walton’s shares have $150 billion between them is trivial by comparison. The Amazon Effect is that online shopping, by squeezing inefficiencies out of the retail chain (in much the same base manner as Walmart, even if using the next technological step to do so), has lowered the inflation rate, per year, by perhaps 0.2% for a decade and more. Two decades possibly. That’s a 2 to 4% reduction in the cost of living for all Americans. Each and every year. In a $23 trillion economy. That’s somewhere in the $500 billion (OK, $460b) to $1 trillion range. Per year, we’ll let the net present value of that be an exercise for the reader. However much Jeff Bezos has is a triviality compared to that.

Back to that point about effective altruism - do what creates the most value for our fellow human beings. Making a pile of cash to give it to charity isn’t the point at all. The process of making the pile is. Of course, there are certain constraints here, must be by actual entrepreneurial activity, not the capturing of economic rents or political corruption and so on. But within the normal dictates of free market capitalism the creation of an organisation that produces value to consumers aids far more people far, umm, morely, than whatever is done with the pile of capital captured from that activity.

This is true whether the organisation is a workers coop - so not producing the grinning capitalist winner atop the pile of gold - or a charity or a capitalist organisation. The value created by the activity is far greater than the amount that is captured to then be given away.

Make the world a better place? Sure, a valid, even wondrous, goal. Providing something better, or cheaper, or previously unavailable, is making the world a better place.

WhatsApp is free and it provides some 1 billion humans with some to all of their telecoms desires. That’s a pretty good piece of altruism right there. Last time we checked Facebook employs a couple of hundred engineers to provide that. This is a greater or lesser piece of altruism than whatever the Zuckerberg Foundation is going to blow the cash upon?

In a free market and capitalist economy the way that money is made is by producing something that other people, voluntarily, purchase. They do so because what is being offered to them adds value to their lives. Creating a successful organisation (we carefully do not use “business” here, but by successful we do mean an organisation that adds value, that profits. The profit being the added value of the output over and above the costs of the inputs - by definition) that salves or sates some human desire is the most effective form of altruism there is. Beats charity by some orders of magnitude - simply because the benefits of that added value are so much larger than any sum that can be appropriated from the activity then given away.

Effective Altruism as a philosophy manages to entirely miss this really rather important point. The way to add more value to more lives is, well, to produce more value that people can enjoy and which improves their lives. The amount of this that is done by making stuff is vastly greater, by those orders of magnitude, than the amount that can be abstracted from it to then be shuffled off to Tristram and Jocasta to pay for the Land Cruisers with which they play Lady Bountiful.

What’s being missed in the philosophy of effective altruism is the effective part - which does seem to be a strange bit to miss for a philosophy so named.