No, we want to drive inefficient producers out of business
The Great Salad Shortage of Winter 2023 has been met by a claim that we must subsidise inefficient salad producers. Or inefficient farmers:
“We need to find a more sustainable way of trading fresh produce," he says. "When I say sustainable, that's got to be sustainable in terms of viability for small producers, in terms of the social impact, food prices, and sustainable in terms of not imposing a negative impact on the environment.”
No. Simply no. The particular part that is wrong is the “sustainable in terms of viability for small producers”.
The background assumption being made is that small producers are inefficient producers. That’s why they need that special care and loving attention to stay in business. But fixing the marketplace so that inefficient producers stay in business is the very definition of stopping us all from getting richer.
We are - of course - made richer in every very real sense by using the least inputs possible to the maximum output we can lay hands upon. That means that our aim in the economy is to destroy jobs. We want to reduce, to whatever irreducible minimum is possible with the current state of technology, the amount of human labour that has to go into whatever it is that we desire.
That labour can then stop growing cucumbers and go off and be ballet dancers, nurses in the NHS or, heaven forfend, produce something useful. We are made richer by now having ballet, nurses and or something useful plus the cucumbers now being more efficiently produced.
Far from wanting to fix the system so that inefficient producers stay in business we desire, lust after, their failing and as soon as possible.
The aim and method of economic advance is to kill jobs, d’ye see? To drive inefficient producers over the cliff edge into bankruptcy so that we can redeploy those ill-used scarce economic resources to do something else.
It is not necessarily true that small producers are inefficient producers. But if the assumption were not being made that they are then there would be no need for a call for a new system to make it viable for small producers, would there?
Make Britain richer, kill a job today.
Evidence first, policy second
One of the reasons we’re so out of step with the modern world is that we do think that evidence first, policy second, is a useful manner of approaching that difficult task of governance. It’s possible that we’re the last people standing who do still think that the way to order things.
Take The Guardian:
Landlords accused of ‘making up stories’ in drive to change UK tax rules
Lobbyist who warned of landlord ‘exodus’ found to have acknowledged to allies sector is actually growing
We are then presented with evidence that more people are living in rental accommodation so what exodus could there possibly be? Thus is the idea that the taxation of landlords be reduced refuted.
Note, when less government - either revenue or power or interference - is suggested then the number of landlords is said to be increasing.
In the same issue of the same newspaper we also have:
Or they may sell up: there is evidence of landlords exiting the buy-to-let market, which may reduce the stock of rental properties available.
But this article isn’t talking about reductions in the taxation of landlords. This one is talking about an expansion of the state housing sector, about more spending - and power and influence - of the state over how and where people live.
Presumably this is something quantum. When the desired policy is no diminishment of the state then the number of landlords is increasing. When it’s convenient to the argument in favour of more state then the number of landlords is decreasing. A nice example of that policy-based evidence making performance art.
We can’t help but insist - however mansplaining, colonialist or even just plain evil that makes us - that better policy is going to be crafted by agreeing upon the facts first then allow them to inform the policy rather than the other way around.
Yes, yes, this is absurdly 20th century of us, possibly even 19th, but we do assure that it’s true. Evidence first, policy second.
This seems eminently sensible to us
Certain Germans are arguing that instead of banning a technology, it should be possible to use any technology which solves the problem being complained about. So, climate change might mean that we should stop burning saved CO2 in the form of fossil fuels. OK, so any solution which stops the use of stored CO2 release should be used. The question becomes which is the best - ie, least cost - method of doing that.
Finance minister Christian Lindner and transport minister Volker Wissing have called for combustion engine vehicles to be exempt from the ban if they can run on so-called e-fuels, synthetic concoctions which some automakers are touting as an alternative to battery-powered cars.
Environmentalists say the intervention is a cynical attempt to woo FDP voters and extend the lifetime of a technology that has had its day.
As we’ve just noted about air travel. Perhaps that e-fuels idea is indeed the solution? In fact, for air travel we’re pretty sure - for whatever our thoughts are worth - that e-fuels are the answer.
Perhaps they are for cars as well? We’d be able to retain the entire current infrastructure after all. Retain personal mobility. We already have all the refuelling stations. We just need to change the source of the fuel. As per the Royal Society report about air travel.
At which point we go right back to basics. What is or should be our decision making method here? We argue that it should be markets. Set the target - net zero CO2 if that’s the thing we want. Then leave be and see which technology does win out in that competition in the marketplace.
For the alternative to that is the obviously absurd idea that those who are good at kissing babies know what’s best for all 500 million of us Europeans - or 430 million EU-ites perhaps. Politicians shouldn’t be deciding upon technologies even if there is room for them to be setting the targets that a technology must reach. So, set the target and anything that meets it is allowable.
Simples.
How gloriously rich China is making us all
This is a strange thing to worry about:
China leads in 37 of 44 technologies tracked in a year-long project by thinktank the Australian Strategic Policy Institute. The fields include electric batteries, hypersonics and advanced radio-frequency communications such as 5G and 6G.
The report, published on Thursday, said the US was the leader in just the remaining seven technologies such as vaccines, quantum computing and space launch systems.
Not wholly convinced about hypersonics to be fair. One of us did work for the Americans on the subject 15 years ago. Which seems like a reasonable head start. But that’s nitpicking:
It said the findings were based on “high impact” research in critical and emerging technology fields, focusing on papers that were published in top-tier journals and were highly cited by subsequent research.
“Our research reveals that China has built the foundations to position itself as the world’s leading science and technology superpower, by establishing a sometimes stunning lead in high-impact research across the majority of critical and emerging technology domains,” the report said.
“The critical technology tracker shows that, for some technologies, all of the world’s top 10 leading research institutions are based in China and are collectively generating nine times more high-impact research papers than the second-ranked country (most often the US).”
That’s getting entirely the wrong end of the stick. Science, knowledge, technological advance, they’re public goods. That is, they’re non-rivalrous and non-excludable. Once a new piece of knowledge arrives then anyone who can read the paper containing that knowledge has that knowledge and their having it does not reduce the amount available to anyone else.
It is for this reason that such advances in knowledge are terribly, terribly, difficult to make money out of. Because there’s no scarcity nor ability to exclude which allows a significant charge to be made. Which is then the argument for public subsidy of knowledge seeking because free markets unadorned will undersupply this lovely, enriching, thing which private incentives under-stimulate.
That’s what the argument in favour of public subsidy of research is. That research is a public good therefore it must be subsidised. For research makes consumers richer but not the producers of the research.
Now the complaint is that China is doing lots of research, making all of us richer at that cost to them of the subsidy of the research. Which is absurd, of course it is. The correct response is to applaud and if we’re feeling really generous send a thank you note.
The institute also called for democracies to establish large sovereign wealth funds for research, development and innovation in critical technology that they add to each year. It suggests allocating 0.5% to 0.7% of gross national income, with co-investment from industry.
Because China is making us richer through the production of public goods we must spend more of our money producing public goods.
What?
Don't Look Up?
We generally try to reduce risks in our everyday lives. If you’re like me, you might have the following thoughts daily:
I should try to not to get run over today by making sure I stop at traffic lights.
I should try and exercise moderately to decrease my risk of heart disease.
I should save a bit more money in case an unseen financial expense catches me by surprise.
But the degree to which we think about risk is dependent on our perception of it. Rather than how risky the actual risk is… If we believe something is significantly more unlikely than it is we could walk headfirst into a serious accident.
This can also be seen with the UK government. Why? Because it is difficult to make political arguments about tackling huge risks which may be seen as unlikely when there are so many tangible (and politically important) problems facing the government right here and right now.
* * *
Don’t Look Up?
What is the chance that you die from an asteroid striking the Earth? Well it turns out that the odds of dying due to an asteroid are higher than you may think, at around 1 in 250,000. How could we respond to this?
There are 3 things to consider when looking at potential responses:
Cost - this one is quite simple. How much do the different proposals cost in relation to their supposed effectiveness?
Trade-Offs - for an intervention to be beneficial the weighted reduction in risk must be greater for the initial risk. Risk-risk trade-offs can regularly be seen in decisions relating to health, the environment and government regulation.
Timeline - if you’re a government, and you don’t imagine an asteroid will strike the Earth in the next century, there’s probably an incentive to palm this off to the next administration. Current government’s have short timelines and are incentivised to allocate their political capital towards things that are electorally successful.
A worthwhile interception
One idea is to crash a spacecraft into the asteroid, several million miles from earth. At a high enough speed the aircraft can cause a slight change in the angle of the asteroid. Diverting it off its collision course with earth. Because of the relative simplicity, it keeps costs to a minimum and there is very little risk to giving it a go. Making it a strong leader in potential solutions.
It has also been proven to be successful with NASA deflecting an asteroid in late 2022. However it should be noted that it requires a fairly long lead time, and as such there needs to be sufficient warning systems. Such that the change in angle from the collision has time to divert it of course with earth.
The Nuclear option (literally)
What happens if that doesn't work? The closer an asteroid gets to earth, the greater risk it presents., and more importantly the harder it is to solve. It is no longer sufficient to adjust the trajectory by fractions of degrees - such that they can take effect over many thousands of miles. There needs to be a bigger shift, so what better way to do that then with a bigger impact: a nuclear strike.
Scientists estimated that the nuclear solution could still be used even with warning times of less than a week. The risk-risk trade off here is an important consideration, after all nuclear weapons are incredibly destructive and nuclear war is the first existential risk we have created.
So what should be done?
The nuclear option could act as a placeholder for the time being, but should not be relied upon in long term plans. Afterall the risk-risk analysis is inconclusive. Because of this we need to ensure that there are sufficient detection systems in place such that other techniques can be employed.
Expanding on the Asteroid Terrestrial-Impact Last Alert System (or ATLAS) in Hawaii would be a good starting point. As it stands, it can offer a one week warning for an asteroid which could level a whole city. Along with a more global approach to both detection and prevention. It should not all be left in the hands of NASA and the Americans.
But one thing we know for show: the Government should look up!
Why we don't believe a word of most pressure group reports
The Food Foundation tells us that so many more families have been plunged into food poverty that we just really must institute free school meals for all on universal credit. State canteens must be lashing out the hash to make up for this dreadful failure of markets and capitalism.
Except, well, it’s tosh, not nosh, under discussion here. As The Guardian tells us:
The number of UK children in food poverty has nearly doubled in the last year to almost 4 million, new data shows, ramping up pressure on ministers to expand the provision of free school meals to struggling families.
According to the Food Foundation thinktank, one in five (22%) of households reported skipping meals, going hungry or not eating for a whole day in January, up from 12% at the equivalent point in 2022.
Except that’s nonsense. That’s not even what The Guardian’s own chart shows, nor what the report says.
What is actually said is that 21.6% are reporting overall food insecurity (note, not skipping meals, going hungry or not eating for a whole day), which is made up of 14.9% relied on low-cost food, 10.5% did not have balanced meals, 3.4% did not have enough to eat and 2.6% skipped meals (some reported more than one).
That 3.4% did not have enough to eat, or 2.6% skipped meals may well be something we’d like to try and do something about. A few more donations to food banks might be that thing of course.
But try this as logic. Food prices go up, people substitute to cheaper food, this is the justification for school meals? Really? A household moves from filet to rump steak and this means more school meals? Switching out the extra-virgin for rape seed oil means taxes must rise? Moving from branded premium to supermarket own brand is a failure of the welfare state?
That is the logic they’re using there. That’s their evidence and they’re sticking to it too.
We agree that we’re being horrible here, why this is almost amounting to mansplaining. But this is a good example of why we don’t believe near anything stemming from pressure group reports.
Seriously, the claim here is that a household moving from organic milk to regular silvertop means that all must have free school meals. The correct reaction here is peals of scornful laughter, isn’t it? That or the Carthaginian Solution.
The case against stealth taxes
The term "stealth tax" generally refers to a tax increase that is not announced or made clear to the public. It can also refer to a tax increase that is disguised or hidden in some way.
The most common one is imposed by failing to move thresholds in line with inflation, so more people are sucked into higher tax brackets, even if they’re no better off. But taxes on such things as air flights and insurance raise prices without people necessarily realizing that government is responsible for the increases.
The UK Treasury team likes them because they conceal the true amount of taxes that people pay. They think that if people realized how much tax they are paying, they would scream blue murder. They might be correct to think so, and this might be no bad thing.
There are several reasons why UK stealth taxes fall into the category of bad things.
Lack of transparency: Stealth taxes involve a lack of transparency in government policy. Taxpayers have a right to know how their money is being spent and what taxes they are paying. When taxes are increased without public knowledge or debate, it is neither fair nor democratic.
Burden on taxpayers: Stealth taxes can add to the burden on taxpayers, particularly those on low incomes.
Unpredictability: Stealth taxes can make it difficult for businesses and individuals to plan for the future. If taxes are increased without warning, it can disrupt budgets and investment plans, potentially harming economic growth and stability.
Lack of accountability: Stealth taxes can be used by governments to avoid taking responsibility for unpopular tax increases. By hiding tax increases or making them difficult to understand, governments can avoid public scrutiny and criticism.
Overall, stealth taxes can erode trust in government and undermine the fairness and transparency of the tax system. While some taxes are needed to address national needs, it is important that they are implemented in a transparent and accountable way.
There is a case for setting out two prices for items, the one it would have been without the taxes, and then the one you have to pay once the tax is included. There does not even need to be a law about this because businesses could start doing this voluntarily, egged on, perhaps, by a pressure group dedicated to bringing this about. The Treasury would scream blue murder, but it would act as a restraint on their rapacity.
The Royal Society's report on aviation fuels
The Guardian says:
Scientists pour cold water on UK aviation’s net zero ambitions
Well, no, not really.
Country would need to devote half its farmland or more than double its renewable electricity supply, says study
Also not wholly true.
The UK would have to devote half its farmland or more than double its total renewable electricity supply to make enough aviation fuel to meet its ambitions for “jet zero”, or net zero flying, scientists have said.
A report published on Tuesday by the Royal Society argues there is no single, clear, sustainable alternative to jet fuel that could support the current level of flying.
This appears to be an adaptation of Arthur C Clarke’s dictum:
If an elderly but distinguished scientist says that something is possible, he is almost certainly right; but if he says that it is impossible, he is very probably wrong.
The adaptation being “If a Guardian article offers an interpretation of a scientific report then The Guardian is wrong.”
For the report itself is markedly more equivocal. It makes the same point we have made several times. If we’ve got cheap hydrogen from renewables then reformulation up to jet fuel via Fischer Tropsch works. The only limitations would be that greater renewables generation and some modification in price.
Once we lift the requirement that Britain must produce the electricity to make the jet fuel - we could, say, import the jet fuel from places where they have more or cheaper renewable electricity, as we do already import jet fuel - then it becomes just a matter of how much the price must be higher to pay for it all. Which will, of course, then flow through into how much less jet travel we have because of the higher price of jet fuel.
As the report says, jet fuel is currently around the $1.10 per litre level. Other sources say around $1.40. Porsche says they can make petrol (not too dissimilar from jet fuel) at $2 a litre. So, the problem’s solved.
Note what the Royal Society report actually says. If, then. If cheap green hydrogen then jet fuel at possibly a slightly higher cost than today. At which point the current infrastructure of flying at that slightly greater cost.
Which, by siting the jet fuel plants in places with lots of cheap renewable power (say, windmills in the Roaring Forties) we can have.
That is, far from the Royal Society saying that this is not possible the report indicates exactly the opposite. If, if, then she’ll be fine.
Which leaves only one part of our reformulation of Clarke’s adage to consider. Are we sure that we want to compare the Guardian to a scientist of any type, let alone a distinguished one?
Quick, quick, we need another recession to reduce poverty!
Get the government onto it, stat!
The Joseph Rowntree Foundation tells us of just horrible poverty in the UK. Except, of course, what they are talking about is not poverty at all. It’s inequality.
Now, yes, inequality is something to at least think about, Adam Smith and his linen shirt and all that (not being able to afford a linen shirt does not make you poor. Except, if you live in a society where not being able to afford a linen shirt is regarded as a mark of poverty then in that society if you are linen-shirtless then you are poor in that society). But that is inequality within that society, not poverty in the sense of the absolute poverty still out there in other parts of the world, that $1.90 a day stuff still suffered by some 700 million people.
The distinction is right there in the JRF report:
It might sound very surprising that measured levels of poverty fell in the first year of the pandemic. This is likely due to changes to overall incomes, policy choices and how the pandemic affected population groups differently. A falling average income caused the relative poverty line to drop.
Poverty, in the definition used, is being at less than 60% of median income suitably adjusted for household size, housing costs and so on. If median income drops but low end incomes don’t - given that low end incomes are largely benefits they don’t - then poverty, by this definition, drops in a recession.
We’re all poorer but poverty falls. This isn’t a good way to measure poverty, is it? Because the simplest and most obvious way of reducing poverty by this measure is to have a good and hard recession. Which is, as a policy recommendation, positively insane.
Despite observation of Whitehall and Westminster over the decades we are really still quite sure that positive insanity is not a useful basis for policy. Even if it has been that basis, it’s not useful. Therefore we need to stop using this measure of poverty, don’t we?
Time to rethink a corporation tax increase?
Barring a last-minute change of heart, UK Corporation Tax will rise to 25% on April 1st. Some people think this tax is paid by ‘business,’ but this is not true. At the end of every tax is a purse or wallet of the person who pays it. A business is not a person, and has no purse or wallet. It passes on taxes that are levied upon it.
UK Corporation Tax is handed over to government by companies, but its incidence is upon their employees, shareholders or customers. The burden of corporation tax affects employees, shareholders and customers in different ways. For example:
Employees: If a company's profits are reduced due to higher corporation tax bills, the company has less money available to invest in employee salaries, bonuses or benefits. Like the misnamed ‘employer contribution’ to National Insurance, it comes out of the wage pool that would otherwise be available for salaries and benefits.
Shareholders: If a company's profits are reduced due to higher corporation tax bills, the company has less money available to pay dividends to shareholders, diminishing their investment returns. Instead of being available for further investment, the money is instead spent by government. It can further hit investors by lowering the value of the company’s shares, and discouraging investment in it.
Customers: If a company's profits are reduced due to higher corporation tax bills, the company may have to increase prices to maintain its margins, which impacts upon the customers who buy its products or services.
Overall, while corporation tax is handed over by the company, its impact is upon its various stakeholders, including employees, shareholders and customers. Estimates of its proportional incidence upon the three groups vary, but many reliable studies suggest that some 60% of Corporation Tax falls upon the employees, with the remaining 40% split between shareholders and customers.
A fourth party impacted by the tax is the nation itself and its wellbeing. The tax discourages firms from investing and expanding in the UK, and encourages others to think in terms of expanding abroad in less onerous tax regimes. Earlier this month, AstraZeneca's chief executive said it wanted to build a new plant in northwest England but "because the tax rate was discouraging" it chose Dublin instead.
If the UK goes ahead with the planned Corporation Tax increase, there will be a talent and investment drain from the UK, alongside a fall in the talent and investment coming in from abroad. Combined with the adverse impact on employees, shareholders and customers, it might be time for a rethink.
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(Note that the graphic at the top is from a 2017 Conservative advert with statistics from HMRC and IFS. Maybe they should revisit it).