Introducing the Snowdon Curve

We are all familiar with the Laffer Curve, the insistence that there is a tax rate - dependent upon the tax, the structure of the society and so on - which maximises tax revenue. Other rates, either higher or lower, gain less yield. When put like that the observation is unarguable. It’s only when the insistence is that we’re above that rate is made that the arguments start. We can have analogues of this, perhaps the Scully Curve which gives us the growth maximising tax rate. Going wider, the Tabarrok Curve for patent strength and innovation rates.

Or, as we think we’re coining today, the Snowdon Curve. As Chris Snowdon of the IEA notes:

New data from Australia, which pioneered plain packaging and has the highest cigarette taxes in the world and has always banned nicotine vapes, shows that youth smoking has increased six-fold since 2019.

There is an optimal amount of regulation, taxation, meant to discourage an activity. Going further than this actually increases the amount of the undesired activity, not decreases it.

If, for example, spirits were taxed so highly that it was near impossible to afford them then how much would home distillation rise? It’s possible to think by more than the drinking discouraged. We do not insist on that particular example, it is just an example.

But here with smoking the thing that everyone wants to discourage most is the teen smoking of cigarettes. On the logical grounds that it is addictive, those who become addicted are likely to shorten their lives as a result and yes, probably the world would be a better place without such. But that doesn’t mean that really strict regulation and really high taxation actually achieve that goal.

We are, after all, dealing with human beings. Who do have a propensity to lying, cheating, tax dodging, if they think the impositions of the killjoys and anal retentives are too high to be bourne. Prohibition did not stop booze consumption after all. High brandy taxes in the past just led to Poldark.

Australia, as the news keeps reminding us, does have a large illegal tobacco sector. The taxes, the restrictions, are worth people working in and supplying it - which leads to the real price of smokes and baccy to be considerably lower - thus consumption higher, than the legal status would suggest.

There really is a curve here. Restrictions can be so onerous that the society simply declares “Bugrit, millennium hand an' shrimp” as with this example of teen smoking and Australian tobacco restrictions.

It’s possible to generalise this further too. Some of us have lived in societies where everything is so tediously regulated that no one bothers to obey any of the laws. This explains the Soviet economy and Italian driving.

There really is this Snowdon Curve, it is possible to have non-optimal levels of tax and regulation which end up increasing the amount of the undesired activity. As with the base Laffer contention, this is unarguable. That we are now beyond this point in many aspects of society, well, let the arguments begin.

If only people would bother to get recycling right

News from the depths of the stock market.

The success of the latest trials support Primobius' goal of being the first to achieve the proposed recycling recovery requirements in the pending EU Battery Regulations. These regulations will mandate recycling of all batteries placed on the EU market. Once legislated, authorised recyclers will be required to recover at least 90% of contained nickel, cobalt, and copper by 2026, increasing to 95% in 2030, 35% for lithium in 2026 increasing to 75% by 2030.

This is nonsense. We have a perfectly good system to work out how much of, to what level of metals recovery, the lithium battery market should be recycled. That method is called “prices”. If copper, nickel, cobalt and lithium are valuable then they will be extracted from batteries to be used again. After all, those millions of tonnes of them would just be money lying around the countryside. There is no barrier to people doing said recycling. The world recycles some 99.9% of all gold ever used (the usual exception noted is that which weathers off gilt onion domes on certain churches) and perhaps 90% of copper and 60% of iron and so on. The decision to recycle is on whether the process of doing so makes a profit - profit being the value added by undertaking the activity.

There are no externalities here that need to be incorporated, the pure market system, driven by prices alone, takes care of everything. So, why do we have an EU target for the recovery rate that must be achieved?

The asnwer being that the EU - and, to be fair, near all other governmental organisations - thinks that there’s some looming shortage of metals about to arrive. This is untrue, it is simply wrong. But they’re planning on the basis of their ignorance - which is one of the reasons why state planning is such a bad way to run the world. That state planning is done by the ignorant, usually in the grips of some fashionable fad. We out here all get poorer as resources are devoted to sating the plans created by that lack of knowledge of the real world.

The optimal recycling and recovery rates are those the free market would arrive at unaided.

Yes, it does get worse too:

… the process flowsheet to meet the ambitious new 2030 recovery targets of the EU Battery Regulations. The goal post shift from 85% to 95% during the drafting of the legislation was challenging

Even if we accept that the bureaucrats knew what they were doing (no, we’ve met many, they don’t) the political process then moved from that bureaucratically determined optimum to one defined purely by the fantasies of babykissers.

This is not an efficient method of running the world. We’re fine with the idea that where markets don’t work then use other methods of management. But we do insist that where markets unaided work just fine, even optimally, then we should use markets unaided. That markets don’t work for everything is entirely true, but let's use them where they do.

This message brought to you by Extinction Rebellion

Just to widen the information gathering network for us all:

Why We Need to Abandon Industrial Farming

Many will argue that chemicals are needed to feed the population, but this is a false dilemma.

Well, that’s not a dilemma, it’s an assertion. So, perhaps it is a false assertion and if it is why is it so?

It doesn’t have to be this way. There are other futures we can choose.

OK, so, tell us, what is that - or those - alternatives?

Something much more likely to succeed would be a return to our roots. The share of people employed by agriculture has dropped precipitously since 1800. U.S. agriculture has gone from almost 60% of the workforce to 1.36% in 2019. In Britain, barely 1% help to satiate hunger. Globally—since 1991—the share of agricultural employment dropped from 43.7% to 26.76% in 2019. As artificial intelligence begins to strip humans of their worth, imagine if humans began working the land once again. What could be earthlier than returning to the land and reconnecting human animals with the natural world that gives them life?

Ah, yes, we thought it might be something like this. We all get to be peasants again, working those 12 hour days in the fields in order to scrape a living from the recalcitrant soil.

by our switch to plant-based diets

Ah, yes, we forgot, vegan peasants.

Simon Whalley is an educator in Japan, the co-founder of Extinction Rebellion Japan,

Well, there we have it, there’s the plan. Forward to the Middle Ages!

Here’s the bit that is always forgotten in these pastoral fantasies. We all consume the labour of others. The NHS is 10 or 12% of the total labour force of the united Kingdoms. And so on and on - everything we get to consume was created by the labour of someone else, just as our own labour goes off to be something that others can then enjoy. So, if we stick 60% of the population back on the land, as opposed to the current 1%, we then lose 59% of everything that is currently created and that we then consume and enjoy.

We are not just vegan peasants that is, we are poor vegan peasants.

We don’t want to be entirely negative though. It is, as we were taught, necessary to find something positive to say about everyone and every situation. Yes, that is lovely and so on.

Around the world, whether the U.S., U.K., or Japan much of the population living in urban areas tends to be more progressive than those in rural areas. As we have seen with the polarization of the United States, this divide desperately needs to be bridged. What better way than for progressives to move back to the heartlands and get their hands dirty along with those with more conservative leanings?

We’re not sure if the countryside is going to agree but if everyone to the left of, say, us is going to be moving there then it’s sure going to improve urban life, isn’t it?

People - even The Telegraph - believe things that are just flat out wrong.

We are told that:

Phosphorus is integral to modern agriculture; you can’t grow anything without it. But the element is also finite; it cannot be made and cannot be substituted. As we eat ever more, demand is rising nearly twice as fast as the growth of the human population.

Scientists have suggested that production may have peaked over a decade ago and reserves will have been completely depleted by the end of this century. What happens then? We probably don’t want to find out.

We do not face some problem of peak phosphorous. That reserves might run out is only because reserves are what has been prepared for imminent usage. Or, as the US Geological Survey puts it “World resources of phosphate rock are more than 300 billion tons. There are no imminent shortages of phosphate rock” Even if there were such shortages of phosphate rock that wouldn't matter - phosphorous is, as we’ve pointed out in Nature, 0.1% of the entire lithosphere of the planet. Quite enough to be going on with. We’ve also explained this in Forbes, even at (free!) book length.

It is indeed entirely possible to have too much phosphorous in the wrong place - algal blooms and all that. But the idea that we’ve some shortage of the element either looming or even possible on anything less than multi-millennial scales is simply nonsense. It is one of these things that just is not true.

Which does open up an interesting can of worms really. If the entire political and cultural sphere is infested with such untruths then how good is government or government planning going to be? A usual hope - clearly oft dashed - about such things being that they at least start from reality.

All we’re asking for here is basic informational competence - too much, eh?

A suggestion for the Tony Blair Institute

Apparently there should be a grand new scheme for pensions. Which, by centralising pension fund investment decisions would make it much, much, easier for the political classes to direct pension fund investment decisions. Even if no one else does we see a little problem in that.

But here’s what makes this plan rank well up there in the Annals of Chutzpah:

A series of changes were made in the early 2000s to a UK pension system that, while imperfect, was largely working for both its members and the companies that sponsored them. There were three specific changes that had a profound negative impact over the following two decades and leading to the situation we have today.

First, in 1997 the government eliminated the dividend tax credit to encourage companies to reinvest profits rather than pay them out in dividends. An unintended impact of the move was to make it less attractive for UK pension funds to hold shares in listed UK companies.

Second, in 2003 legislation converted what had previously been natural risk-sharing between employers and employees with respect to pension payments into a “hardened” contractual obligation for companies, covering all obligations of their pension funds.

Third, with pension-fund obligations now having the status of a hard liability for employers, the Accounting Standards Board introduced new requirements for UK companies to include pension-fund assets and liabilities on their balance sheets. Through this change, assets would be shown annually at prevailing market value (that is, with no allowance for future returns) and, crucially, total future pension liabilities would be discounted by, in effect, a fluctuating long-term bond rate.

That is, Britain had a perfectly good pensions system which was entirely and wholly ruined by the government of the time - Proprietor one T. Blair at that very time. However much bullied by one Brown, G., that was who was PM. The answer to the problems created by this is a New Grand Plan from the new minions of Blair, T., which will entirely solve everything and have no ill side effects unlike the last one, no siree!

Please do call us Mr. Picky here if that’s the way you want to roll but we just can’t help but think that perhaps undoing the past mistakes, now they’re properly identified, might be a better idea than making a whole load of new mistakes.

Perhaps that’s Mssrs. Picky given that we use the communal voice here.

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.