What price caps achieve

The nominally Conservative UK government in the UK is talking to the supermarket owners with a view to seeing prices of essential foodstuffs being capped.

We have price caps on energy, and there is talk of rent controls such as exist in Dublin and Stockholm. There are many bad ideas in economics, but price caps must rank as one of the worst.

In 1978 my colleague, Dr Eamonn Butler, co-authored a book entitled “Forty Centuries of Wage and Price Controls.”  It chronicled 4000 years of attempts to cap wages and prices, from Hammurabi in ancient Babylon to the attempts by Edward Heath in the UK and Richard Nixon in the US to fix wages and prices. The one consistent feature is that all of them fail. They fail because prices are a signal that changes behaviour. If something is in short supply, a price rise encourages people to use less of it. It also encourages producers to bring more of it onto the market. A price cap prevents that signal from being sent, and does not encourage less consumption and more production. A price cap on energy does not persuade people to use less of it or for producers to search for more of it.

A price cap on rents guarantees a shortage of rental properties. It tells landlords that they can make better returns on their capital elsewhere, and to take their properties off the market.

Prices signal the interaction of supply and demand. They tell us what is happening in the economy. To set that artificially is to lose that information and the behavioural changes that it engenders. It is akin to trying to control the temperature in the room by blocking up the thermostat. You stop the signal, not the reality that it should be measuring.

It is part of the sad reality of broken Britain that we are looking to policies that we know from experience simply do not work and never have.

Light pollution and Goodharts's Law

It may well be that as we’re all getting richer we use more light and therefore we can see fewer of the stars in the night sky:

It was not to be. The night sky was not so much black as dark grey with only a handful of stars glimmering against this backdrop. The Milky Way – which would once have glittered across the heavens – was absent. Summer’s advent had again revealed a curse of modern times: light pollution.

The increased use of light-emitting diodes (LED) and other forms of lighting are now brightening the night sky at a dramatic rate, scientists have found.

Perhaps expanding the area in which the drunk can look for his keys is worth not being able to see the stars. But we’d just like to point out that it’s not LEDs causing this. Quite, quite, the opposite.

The biggest change in lighting in recent decades has been the ongoing replacement of the old sodium/scandium bulbs for street lighting with LEDs. The big difference - other than the base technology - is that LEDs are directional. The older technology threw off light in any and every direction, the new one directs - almost always downwards. For any given level of lighting we therefore gain less, not more, light pollution.

As we’ve pointed out before one of the little absurdities of this life is that one of us used to run the shadowy international scandium oligopoly - to the extent of, for a couple of years at least, supplying 100% of the world’s non-China light bulb industry.

We can approach a proof here from the other end as well. Measuring GDP growth by measuring the light that can be seen from satellites was first a new idea, now it’s become standard to the point that the World Bank uses it. At first it was a useful idea too. But then comes Goodhart’s Law.

Goodhart’s being the point that once we start to use a measure as a target is ceases to be a good measure. A strict application of that here would imply those who would fool us about economic growth shining searchlights at satellites. No, we do not suggest that is happening.

But we have had this technological change. From omnidirectional to unidirectional street lighting. Which disrupts the relationship between observed public lighting and economic growth. There is even a way to correct for this (we’ve suggested it to at least one researcher, look for the specific spectral markers Sc produces and alter for that, we don’t know whether it has been adopted) but it is true that the link between light and growth is changing. Some are taking this to be growth which is, perhaps, being lied about more. We would insist that at least some of it is because lighting technology has changed.

Unless we’re going to call into evidence some extreme version of Jevon’s Paradox here LEDs are part of the solution to this problem, not the cause of it.

BTW, the LEDs don’t use scandium, it was this exact technological change that broke the oligopoly part of that shadowy international scandium conspiracy. As all monopolies and oilgopolies always do get broken, eventually, by technological change.

To save democracy abolish the quangos

Just because we’ve decided to remove an issue from politics doesn’t mean the politics is removed from the issue:

To her opponents, Falkner is more interested in doing the government’s bidding than protecting the commission’s independence. They point out that the Liberal Democrat peer was appointed to the job by Liz Truss, and claim that she always had an agenda: to make the EHRC more pliant to the Conservative stance on trans rights.

“The EHRC is not independent but we have always tried to remain impartial,” said one staff member who left over Falkner’s leadership. “But when Kishwer [Baroness Falkner] started, she kept referring to Liz Truss . . . as her boss. It was embarrassing and staff had to tell her not to, especially in front of other human rights organisations.”

Another said: “This is just a continuation of the problem of having a supposed independent organisation whose board is appointed by the government.”

The specific issue is, obviously enough, the definition of male and female and therefore whether it is possible to change from one to the other. We’ve all agreed that gender is a culturally defined variable, but sex? Well, that’s a political question, an intensely political one. And that we’ve shovelled it off into this independent body hasn’t removed the politics from it. It’s just made the politics play out in staff complaints, leaks to the press, general smoke filled backrooms stuff.

Instead of where democratic politics should be played out, at the ballot box. This being the entire point of the whole game, democracy is the only way anyone’s come up with of making these grand decisions without bloodshed.

Note what we’re not arguing here, for one or another answer to the question. Rather, for the system that must be employed to try to reach one. On such things it’s the demos that gets to have its say.

Other examples abound. We’re told that government must not be able to appoint the BBC chair. But the licence fee is a tax (yes, that’s the legal position, G Brown said so) and taxes and the spending of them get determined by that demos. There’s this most recent fuss that apparently we should pass power over pandemics up to the unelected - and unelectable (take that either way you wish) - World Health Organisation. We’d argue very strongly indeed that anyone with the power to shut down society must be forced to face the public even if retrospectively.

Or the Climate Change Commission. That climate change might well have passed beyond being a political point but what to do about it, how to do it, are still intensely political questions. As Just Stop Oil prove on multiple roadways each week. Therefore the decision-making must not be shunted off to the backrooms to be run by Lord Deben, but be decided by that ballot box.

Partly because, as above, that democracy, that actual political sphere, is the only way that anyone’s worked out to make such decisions without riotous turmoil. But rather more importantly, unless the decision made has the support of the majority then the majority simply won’t obey the rules then laid down. Without democracy deciding things the demos won’t obey the decisions. We’d become Somalia, or Italy without the weather.

This does lead to a slightly odd conclusion. We here at the ASI are insistent that vast areas of life have nothing to do with politics, democracy, the will of the majority and are best dealt with by keeping the PPE graduates well away from them. Which we stand by of course - it’s just that we also agree that there are limited areas of life where a political decision must be made. Which must then be made by that majoritarian politics, not by cabals in backrooms.

Abolish the administrative state and bring back politics with meaning.

Footnote. On the subject of the CCC we note their front page:

Net Zero offers real ‘levelling up’, but Government must get behind green jobs

The shift to Net Zero is already underway, with the creation of around 250,000 new jobs in the transition so far, but policy is now required to maximise the employment benefit of Net Zero and manage the risks.

As we, the economically educated Illuminati, know, jobs are a cost. They’re a cost of getting something done, not a benefit of having done the thing. So here is the CCC not just applauding the idea that we have a quarter million more costs involved with saving Gaia they’re insisting that we must all be made poorer yet again by doing this ever harder to ourselves. Perhaps we should just pray that the NHS will restock on anti-psychotics real soon now.

There's another reason George, another reason

Bucolic romanticism might seem harmless. But it leads, if enacted, to hunger, ecological destruction or both, on a vast scale.

This is entirely true. George Monbiot is talking about:

Farming in Transylvania looks (or did until recently) just as it “ought” to look: tiny villages where cows with their calves, ducks with their ducklings and cats with their kittens share the dirt road with ruddy-cheeked farmers driving horses and carts; alpine pastures where sheep graze and people scythe the grass and build conical haystacks. In other words, as the king remarked, it looks like a children’s book.

That other reason being that this bucolic romanticism is also the same thing as gross and abject poverty. Really, truly vile standards of living. Which is why absolutely every human society that has been able to abandons it as soon as possible. We are talking of lifestyles of £2,000, perhaps £3,000 a year instead of the £30,000 enjoyed (that is about the median in today’s UK) here. A tenth and worse of today’s living that is. And yes, obviously, that is already correcting for the costs of things over time and geography.

The problem with peasant farming, as with peasantry as a whole, is that peasants are poor, really, really, poor.

This, of course, being why the British peasantry flocked in their hundreds of thousands to the dark Satanic mills as soon as the option was available. The people who‘d done that backbreaking work for small reward weren’t going to do it for a moment longer than absolutely necessary.

If we could just suggest a response for the Prime Minister?

Sarah Olney asked in the Commons why Britain does not provide the same subsidies that other countries do toward solar cell manufacturing. That was the gist of it at least. As the FT reports on the same incident:

But Chris Case, its chief technology officer, told the Financial Times that between continental Europe, the US and the UK, the latter was the “least attractive” location for the factory to manufacture the cells because of a lack of incentives.

Incentives, here, being of course taxpayer subsidies to the capitalists so they’ll build their factory here, not there.

At which point a suggested response for the Prime Minister.

“Mr. Speaker, the situation outlined is that German taxpayers are subsidising the production of solar cells. This then makes solar cells cheaper in Britain, solar panels cheaper in Britain and, as these things work out, solar power cheaper in Britain for Britons. I am then asked what I’m going to do about this. The response is, obviously, nothing.

“Just to point out my current job is Prime Minister of this country, not Chancellor of Germany. German taxpayers are losing money so that British consumers will be better off. I should stop this process why?

“As Tim Almond has pointed out, the correct response is “Great, they’re subsidising the buffet, pull up a bollard and tuck in.” If a software developer in Swindon gets this why is it so difficult for the Hon Member for Richmond Park to grasp economic reality?”

We recommend it to the House.

An eye on AI

The largest AI models should be monitored by a third-party auditor - who would basically check an AI system to ascertain its capabilities and the risk it poses. Both OpenAI and Anthropic - two of the AI labs with the most advanced systems - commissioned a third-party auditor called ARC Evals to act as a ‘third-party evaluator to assess potentially dangerous capabilities of today’s state-of-the-art ML models.’

A safety evaluation of an AI system, known among AI labs as an ‘eval’, checks an AI system’s capabilities to ensure that pre-deployment they are developed and deployed responsibly and with human interests in mind. When ARC Evals stress-tested OpenAI’s pre-aligned GPT-4 it did so in a controlled environment and in essence tried to make the model misbehave.

They managed to make GPT-4 lie to a human and get that same human to perform a task for them on TaskRabbit, make long term strategic plans, and write and run code: ‘As AI systems improve [...] It is important to have systematic, controlled testing of these capabilities in place before models pose an imminent risk, so that labs can have advance warning when they’re getting close and know to stop scaling up models further until they have robust safety and security guarantees.’

ARC Evals is particularly worried that future and more advanced systems might exploit financial arbitrage, create new pathogens, and impersonate online humans. 

With this in mind, British-based Deepmind got together a very stellar cast of AI researchers including Turing Award winners, to hash out *exactly* how one monitors the risks from the increasingly advanced and potentially more dangerous AI models. They find that: ‘Current approaches to building general-purpose AI systems tend to produce systems with both beneficial and harmful capabilities [and that] Further progress in AI development could lead to capabilities that pose extreme risks, such as offensive cyber capabilities or strong manipulation skills.’

And because of this, they go on to explain ‘why model evaluation is critical for addressing extreme risks [...]. These evaluations will become critical for keeping policymakers and other stakeholders informed, and for making responsible decisions about model training, deployment, and security.’

Model ‘evals’ to uncover the risk of extreme risks of catastrophe and existential risk ‘should be a priority area for AI safety and governance.’ Major labs such as Google Deepmind, OpenAI and Anthropic have perhaps the biggest responsibility in the whole AI ecosystem, as they are the ones developing the model - which can be used for great good or for great (even unintentional) ill. Perhaps an International Atomic Agency for AI would be a suitable house for such a system of monitoring.

The Adam Smith Institute’s paper will be released next month and I cannot wait to share with you the fantastic innovation-led policies for the safe deployment of AI that we have cooked up.

Don't use planning, use prices

A certain chortle here as French Greenpeace gets very upset:

Greenpeace France said the halted flights represented only three among 100 domestic routes, which was “extremely insufficient”. However, with other campaign groups it called France’s action important as it set a precedent that could be expanded across Europe. France plans to add more routes to the ban when it reviews its list in three years.

This is about that French plan to ban flights between places that can be reached by train. To which one response is well, having spent all that money on high speed trains they’ve got to do something to get passenger numbers up, don’t they?

What’s annoying Greenpeace (and, joy, it’s the French division of) is that this carefully crafted political plan only stopped those three flight routes - which Air France had actually stopped running already as people voluntarily took to the trains instead. So the actual effect here was, umm, nothing.

Now, we’re not sure that flights need banning, curtailing or even diminishing. We’re even less certain that domestic flying is the abomination some think it is. But there is still some advice possible.

Think, for a moment, about Air Passenger Duty. This was just, last month, halved for UK domestic flights. On the grounds that the rate was discouraging too many people from flying. That is, prices work in curbing domestic flights. Planning doesn’t, as in the French example. So, therefore use prices not planning.

As we say, we’re deeply uncertain (in fact, to the point of not caring) whether domestic flights should be curbed. Just as there are many other things demanded by all sorts of people that we’re either not sure or uncaring about. But the advice we want to pass on is that if you do actually want to change something then use prices, not regulation and planning. Because prices work and regulation and planning don’t work.

Of course, this advice is useless in this specific example because it’s difficult to get a Frenchman to believe that the Anglo-Saxonism of markets will cure anything and absolutely impossible to get anyone from Greenpeace to believe prices are important. But for those few rational out there - use prices, they work.

It's not that we told you so but we did tell you so

We did suggest that this would happen:

Post-Brexit curbs on immigration are proving a boon for restaurant workers as wage increases outstrip the national average.

Pay for staff in the hospitality sector has risen by 9.5pc – compared with the national average of 6.6pc – over the last year, new research shows.

Actually, we took to the pages of the national press to insist that this would happen:

Brexit is about to give us a problem with this, though. Karl Marx was right: wages won’t rise when there’s spare labour available, his “reserve army” of the unemployed. The capitalist doesn’t have to increase pay to gain more workers if there’s a squad of the starving eager to labour for a crust. But if there are no unemployed, labour must be tempted away from other employers, and one’s own workers have to be pampered so they do not leave. When capitalists compete for the labour they profit from, wages rise.

Britain’s reserve army of workers now resides in Wroclaw, Vilnius, Brno, the cities of eastern Europe. The Polish plumbers of lore did flood in and when the work dried up they ebbed away again. The net effect of Brexit will be that British wages rise as the labour force shrinks and employers have to compete for the sweat of hand and brow.

It is, of course, entirely possible to argue that you’d prefer the cost of labour to not rise. But that is the same thing as arguing that you want wages to remain low. A higher cost of labour, rising wages, higher incomes, they’re all exactly the same thing.

We're really, really, not about to run out of elements

A startling piece of misinformation is circulating again. The thing that makes us sad about this - no, really sad - is that it comes from the American Chemical Society. You know, one of those official bodies that we’d hope would actually be informative. Even, possibly, attempt to be factually correct. You can see their warning about the elements we’re going to have significant supply problems with here. We’ve covered this subject at book length here (it’s free!).

But to cut to the short version. The ACS says that there’s a serious threat of running out of gallium, germanium and hafnium in the next 100 years. All of which is a heck of a surprise to any geologist or anyone actually in the metals business. So it’s difficult to grasp why the chemists are in such a tizzy about it.

Gallium is extracted from a Bayer Process plant. That’s the stage of the aluminium business that turns bauxite, the ore (and possibly the most common component of the Earth’s surface) into alumina, the oxide. The gallium in the bauxite goes into solution and with the right little doohickey it can be extracted. Which is what is done. We have - already mapped out, ready to roll - at least a 1,000 year supply of bauxite. We’re not going to run out of gallium.

Germanium has two sources, a byproduct from the mining of zinc from spharelite and another process which extracts from fly ash. That’s the waste left over from the burning of coal. There are hundreds of millions of tonnes of fly ash lying around the countryside in vast ponds. We’re simply not going to run out of germanium.

Zircon is a common enough mineral, the world uses perhaps 600,000 tonnes a year, there are millennia of it out there at least. All zircon is 2 to 4% hafnium. We usually don’t bother to extract it as for near all uses the two are so similar that we don’t care. Sometimes we do care and so we extract the Hf from the Zr to use them separately. We extract perhaps 500 tonnes a year of the 20,000 tonnes of hafnium already incorporated in the zircon/zirconium moving through the system. We’re not going to run out of hafnium.

All of which is bad enough, the official sources being so horribly out of whack with reality (and as an aside, one of the reasons that state planning works so badly, it so often starts from such lack of knowledge as this). But Ga, Ge, Hf, they’re not exactly at the top of the worries list for most people.

But think on it, if they’re this wrong about these simple things then what else is wrong in all of the other things they’re saying to us?

Peter Thiel is wrong about technological advance here

It’s a common complaint but an incorrect one:

For example, Thiel points out, air travel has hardly improved in decades. In fact, with the demise of Concorde, we now have less access to high-speed air travel than we did 30 years ago.

That is to assume that the only possible improvement to air travel is greater speed. As if the only possible improvement from the agricultural revolution were more turnips. Or the computing revolution meant faster calculators.

Items - goods, services - can improve by many metrics. Along different spectrums if we like. Which they often do in fact. They get to “good enough” along one direction, toward one end of a spectrum, then stagnate in that direction. Cars, say. The first few decades increased speed - safe speed that is - as something that was developed as being able to cruise at 70 mph, or 80, was a great improvement over doing so at 20. But the improvement from 80 to 130 - say - was of must less value. Partly because of the reaction times of the wetware controlling it but also because most to many of the things we might want to use a car for can be done at 70 or 80 and 130 doesn’t add much value. Cars are much safer than they used to be, much more reliable, vastly cheaper for the level of performance than they used to be. All of which are technological improvements. Anyone claiming that car technology hasn’t improved in the last 50 years would be laughed at as a ludicrously ill-informed rube.

Airplanes have hugely advanced in that same past 50 years. Not in speed, true - 520 mph seems to be good enough for many uses - but ‘planes are very much safer than they used to be. Less noisy too. Also, the use of a ‘plane is hugely, vastly, cheaper. Roughly, you understand, just roughly, a trip from Britain to Europe, 50 years ago, cost about a week’s wages. Today it can usually be done for a day’s. And that’s not because wages have risen that much.

To claim that’s not technological advance is, well, rube-ish.

Of course, this becomes important when we consider train travel. Sure, the average speed hasn’t increased in 50 years. This does not mean we require high speed trains. We’ve developed the internet that works on trains now, so time spent on one is not time that is subtracted from working hours. That’s what kills the HS2 cost benefit analysis as it was originally done. And really, anyone want to claim that adding the internet to trains is not a technological advance? As, you know, has also recently been done to ‘planes?