It's astonishing how long people can remain wrong

Robert Reich wants to tell us that free trade’s just old hat, that David Ricardo isn’t always right and, well, let’s have some of that old time protectionism:

The age-old economic doctrine of “comparative advantage” assumes that more trade is good for all nations because each trading partner specializes in what it does best. But what if a country’s comparative advantage comes in allowing its workers to labor under dangerous or exploitative conditions?

Why shouldn’t the US’s trading partners be required to have the same level of worker safety as that of the United States or give their own workers the same rights to organize unions?

One answer is that therefore all the dangerous jobs will be done elsewhere which would be pretty good for American workers and their lifespans. But the really argument is that comparative advantage does not assume that more trade is good, it proves it. We are not working with a petitio principii that must be proven, we are using the proof itself. Comparative advantage is what proves that more trade is good, not something that assumes it.

But much more fun is to point out that Paul Krugman dealt with exactly this some 30 years ago:

The same principle applies to international economics. Comparative advantage is an old idea; intellectuals who want to read about international trade want to hear radical new ideas, not boring old doctrines, even if they are quite blurry about what those doctrines actually say. Robert Reich, now Secretary of Labor, understood this point perfectly when he wrote an essay for Foreign Affairs entitled "Beyond free trade". (Reich 1983). The article received wide attention, even though it was fairly unclear exactly how Reich proposed to go beyond free trade (there is a certain similarity between Reich and Gould in this respect: they make a great show of offering new ideas, but it is quite hard to pin down just what those new ideas really are). The great selling point was, clearly, the article's title: free trade is old hat, it is something we must go beyond. In this sort of intellectual environment, it is quite hard to get anyone other than an economics student to sit still for an explanation of the concept of comparative advantage. Just imagine trying to tell an ambitious, energetic, forward-looking intellectual who is interested in economics -- William Jefferson Clinton comes to mind -- that before he can start talking knowledgeably about globalization and the information economy he must wrap his mind around a difficult concept that was devised by a frock-coated banker 180 years ago!

As we say, amazing how long some people can persist in being wrong. Paul Krugman’s expertise is in trade too - this isn’t just the repetition by rote from the textbooks. We’d certainly consider our prejudices if a Nobel Laureate addressed us by name and pointed out that, well, actually, you’re wrong. We do think Reich should have done the same.

Abject nonsense on ultra processed food again

As the modern world shows us it’s not, in fact, necessary to be religious in order to be a Puritan. So they’re trying again, everyone in the country must live on raw turnip to appease the liberal and modern thinkers:

Britain faces a “tidal wave” of heart disease due to a dependence on ultra-processed food which is causing harm similar to smoking, research shows.

Two landmark studies have revealed that ultra-processed food significantly increases the risk of high blood pressure, heart attacks and strokes. Even “healthy” processed options, such as protein bars, breakfast cereals, low-fat yoghurts and supermarket sliced bread were linked to worse heart health.

Gosh, well, yes. We’re certainly willing to examine such claims. They go on:

More than half of the typical British daily diet is made up of ultra-processed food, more than any other country in Europe. The products, made using a series of industrial processes, include breakfast cereals, ready meals, frozen pizzas, sweets and biscuits.

So, if the British eat more of these UPFs and UPF causes these medical horrors then the British must suffer more from such medical horrors. Certainly, if the effect is large enough that we need to do anything - move back to the raw turnips say - then this would be readily apparent in the population health statistics.

Hmm. Deaths by heart attack we’re middling across Europe. Stroke incidence we appear to be low (with our internal ranking going Oxford, South London, Scotland, the last being the lowest. Which isn’t what we’d expect if it’s a diet high in UPFs as a cause).

Britain has the lowest rates of high blood pressure in Europe, with around one in eight women and one in five men with high blood pressure, compared to more than a third of men in several central and eastern European countries.

Oh.

Now we all do know that correlation is not causation. But if you ain’t even got correlation then you ain’t got nuttin’. Recall, the claim is UPF causes these diseases, the British eat more UPF therefore these diseases should be worse here. They’re not. Collapse of the theory then.

Oh well, luckily the major purveyor of this idea still has a back up career as a purveyor of fish finger sandwiches at his fast food chain. And the rest of us don’t have to subsist on raw turnips.

Sorry but we've already spent all the money

Robert Colville picks up on a point we’ve made more than once over the years. We can’t ask government to do anything more for us. Because we’ve already spent all the money:

“The UK’s ageing population will effectively confront policymakers with a choice in coming decades,” wrote the authors. “Increase levels of tax substantially to fund higher spending or substantially reduce the scope of the public services that the British state provides.”

We’ve already promised ourselves that the State will support us as we dodder to the grave. Therefore we simply cannot have anything else from said State - all the money’s already been promised to pay for that doddering.

So what can we actually do about it? Well, part of the problem is that most previous attempts to restrain spending have been fiscal rather than philosophical — that is, they have started with the amount we need to save rather than asking the question: should government actually really be doing this?

That’s true. If we were to bin many of the things currently done then we could free the resources for that social state we’ve promised ourselves. Strip government back to the FCO - J Foreigner’s still going to be there whatever - and the MoD - J Foreigner etc - and the chequebook to pay for the social. Simply stop doing everything else.

We have to admit that we’d not be averse to such an outcome. We might be argued into police and courts as well. But culture, energy, communities, education, planning and on and on as central powers they’re to go.

Quite joyous actually.

However, there is an alternative to stripping back to a dotagewatch state. Which is to get richer and so be able to afford all these things - if that is indeed what we desire. The trick there will be to stop government actively preventing us from getting richer. Sam Dumitriu’s recent finding that the paperwork application for a tunnel was one page of bureaucratese for every 2.5 inches of tunnel (yes, we have checked the orders of magnitude there, that is correct) is a useful example here.

That is, let’s have that Singapore on Thames that so horrifies all too many. At the 3 and 5% growth per annum possible when we’ve not got the State deliberately killing off initiative then we can have nice things. We could even point out to Polly that this is the way Sweden does it. More free market, more capitalist, than even the US let alone the UK - but with a swinging slice of those riches taken for said nice things.

Now, we would prefer that minimal state simply because we insist that leaves more room for liberty and human flourishing - the two things we think important in this world. But the important insistence is that even for those who don’t want that, who want that larger state which can deliver more pressies, we still must have that free market vibrancy. Because that’s the only way to produce the growth which will pay for it.

Get the State out of the economy and it might be possible to produce the money to pay for the rest of the State.

There are three viable choices. We go bust trying to pay for what we’ve already promised ourselves. We strip the State back to only paying for those promises. We strip the State of power and influence over the economy - go wildly free market and capitalist - and thereby generate the wealth to pay for it all.

There are alternatives, indeed there are, but the status quo isn’t one of them.

You can't reparate someone who has been made better off

Slavery was vile - common but vile. We’re all agreed the world is better off for its absence. Even as we note that there are still pockets of it still extant. Arab Sudanese were at least credibly accused of going slaving in 1990s Darfur, there are relationships between Twa and surrounding Bantu groups that would be difficult to describe as other than slavery.

However, to repeat a point we’ve made before. If the descendants of slaves are now better off as a result of their ancestors’ slavery then it’s simply not possible to pay reparations to those who are already better off. It’s simply a logical impossibility.

The president of Guyana has called on descendants of European slave traders to offer to pay reparations to right historical wrongs.

Irfaan Ali also demanded that those involved in the transatlantic slave trade and African enslavement be posthumously charged for crimes against humanity.

With a GDP per capita approaching $10,000 the people of Guyana are some four to five times better off than the genetic source in, say, Ghana. It’s simply not possible to atone for that. Therefore the reparations argument fails.

Do note, again and just for the avoidance of doubt. Slavery was a bad thing. Those who were enslaved suffered horribly. But it is not possible to pay reparations to their descendants because those very descendants have been made better off by that historical slavery.

That grifters can see a wallet they might be able to prise open is a useful political argument but it’s not a valid basis for public policy.

Those $7 trillion fossil fuel subsidies as per the IMF

Fossil fuels benefited from record subsidies of $13m (£10.3m) a minute in 2022, according to the International Monetary Fund, despite being the primary cause of the climate crisis.

The IMF analysis found the total subsidies for oil, gas and coal in 2022 were $7tn (£5.5tn). That is equivalent to 7% of global GDP and almost double what the world spends on education.

So, what should we in Britain do about this? Well, first, perhaps see how much we in Britain are contributing to the problem. The numbers are available as a spreadsheet here. We’ll not claim to have been exhaustive in our reading but we think that the IMF is claiming a £1.7 billion direct subsidy to fossil fuels in the UK. Which is a triviality. Either in the context of the global numbers the IMF is presenting us with or in the context of the UK economy.

It’s the indirect numbers that actually make up by far the bulk here. And the IMF calculates those by insisting that fossil fuel use should cover all externalities of its use plus whatever the VAT rate is on top. Anything less than that is a subsidy.

Well, if we take that straight then of course subsidies to renewables are vastly larger than normally claimed. The lower domestic energy VAT rate applies there, no?

But we can also look at the detail of their claim that the UK has indirect subsidies on petrol and diesel. Page 14 here. They are counting £tens of billions of fossil fuel subsidies there. But close examination shows that to be unwarranted. In fact, we’d say wrong. Because the effects specific to fossil fuels - pollution etc - are entirely and fully covered. The parts that aren’t are congestion and road damage. But if we all switched to EVs tomorrow then those two would be the same - higher in fact, given greater car weights. So that externality is not a subsidy to fossil fuels but to autonomous transport. Really shouldn't be included here at all.

Actual close examination shows that we in Britain don’t subsidise fossil fuels above anything but the level of utmost triviality. Which is presumably why the Guardian didn’t give us the national numbers, only the global.

The argument for less government is the government we have

This is not, in fact, about the politicians. This is about the level below, that permanent state of the civil service:

The government has been accused of “staggering incompetence” after new school buildings it commissioned had to be closed due to safety fears, while others under construction were demolished before they even opened.

Main buildings at two secondary schools and a primary school in England, which were all completed relatively recently using a modular, off-site construction method, were told to close with immediate effect, disrupting the start of the new term for many pupils.

A government minister admitted there were issues with the structural integrity of some buildings, prompting fears they would not be able to withstand extreme events, including severe weather or being hit by a vehicle.

Those Rolls Royce minds knowing best from Whitehall. Well, no, they don’t. Clearly they don’t.

Which poses a problem. A problem for anyone who desires an invasive and managing state that is. The problem being that we’ve simply not got the staff to be able to have such. All the people who actually know things, how to do things, are off knowing and doing things. Leaving a cadre of adminstrators who, umm, administrate. And, as we can see, being able to file Form C in the C shaped slot is not an aid to being able to get a school built by a competent builder.

Therefore, and obviously, that state, manned by incompetents, should not be managing or even administrating the building of schools. Nor anything else complicated beyond the idea of getting out of bed in the morning.

This is not a theoretical nor ideological position it’s merely the result of observation. The British state is incompetent. Therefore we should ask the British state, heck, allow the British state to do the minimal amount necessary to keep civilisation on track. That would mean that night watchman state which does only - and really only - those things that both have to be done and can only be done by government. Maybe defence - which they’ve not been good at these recent decades - and making sure the bins get taken out. Wouldn’t want to tax the skill level too much after all.

That this does neatly match up with our own ideological convictions is both true and fun. And yet an administrative state that allows schools to be built out of dodgy concrete and people want it to be planning how we’re going to compete with the seven billion nine hundred and 30 million odd people who are not British? Not subject to such expert knowledge? We going to sell them JCBs after we’ve sold them the school building method or something?

No, really, there are people insisting that these same minds - the ones who can’t get concrete, a 2,000 year old technology, sorted - should determine what’s the next mineral to be mined, the energy system of the future and who should make, how, the next generation of microchips but three.

Getting rid of the civil service would be impossible, C Northcoate proved that. But we can sever their relationship with the real world easily enough. Leave them filing C in C and B in B and leave the rest of us to get on with life productively. Simply kill the requirement for anything to need civil service approval or oversight. They’ll still be happy with their paperwork and we’ll be amazed at how much better life gets.

That argument, that is, for free markets and liberty is that the opposite, government control, is incompetent. We are in a reverse version of that movie Idiocracy. So, let’s stop doing that then and be free - and vastly more important, let’s be rich by being free. Anyone gets to do anything subject only to the basic Common Law rules of no harm, no foul, and leave government to pleasure itself with paperwork.

Works for us.

You're right, the Net Zero plan is idiocy

This is not about climate change. It’s not even about that desire to get to net zero by 2050. It’s about the Net Zero plan. Which is, as we insist, idiocy.

Within the next three years, rural households who have relied on heating oil for decades could be forced to spend tens of thousands retrofitting their homes to accommodate a heat pump.

By 2026, replacing a broken oil boiler like for like is set to be banned, leaving homeowners not connected to the gas grid with no choice but to dig deep and buy an electric heating system. A similar proposed deadline for homes reliant on gas is not until 2035.

It is one of the policies put forward by the Government as it marches towards its goal of net zero carbon emissions by 2050.

Heating oil, the Government argues, is an incredibly carbon-intensive fossil fuel and must be abandoned if Britain is to meet its green pledges.

We can even leave aside the logic being used there - that it’s net zero or be cold. Our aim is the maximisation of human utility and yes, that probably does mean another mm to two of water in Bangladesh as against freezing in a British winter. But as we say, leave that aside.

For two years now, residents of Kehelland, a hamlet near Camborne, have been taking part in a landmark trial using cooking oil recycled from factories.

Hydrotreated vegetable oil is a form of renewable diesel, created by taking waste fat and feedstock and processing it using hydrogen.

The mistake - the insanity - is that they’re proscribed a base technology, the oil boiler. But they can be run on a number of different fuels. Here, the cooking fat. Or green hydrogen gussied up by Fischer Tropsch. Or other things that we don’t know about perhaps.

That is, even if Net Zero really must happen banning the oil boiler isn’t the right way to do it. Banning the use of things that emit is. But what’s the way that the plan has been written? Quite, some combination of bureaucrats and politicians banning all the things they don’t understand. Which isn’t, we suggest, the correct method of running a country.

Even if this is all necessary it’s only ever the goal that should be planned. On the obvious grounds that we 67 million out here will come up with some interesting ways of reaching it, things that simply never would occur to the average PPE graduate who writes these national plans.

The appalling idea of a national mission

The idea that we should have a mission-driven economy is an appalling one:

Of course, that may sound like a lofty and idealistic proposition,

What is this loft?

What is required is a more sophisticated understanding of government debt management, alongside an overarching purpose or mission for the economy – a mission-driven economy as Mariana Mazzucato puts it – that would help shape economic policy.

No, that’s an appalling idea and not just because it comes from Mazzo.

The background to this is that economic policy making should be split up, changed, made different, so as to enable this mission-driven economy idea. But the mission-driven economy idea is also being touted as the reason to change economic policy making. We should change the system so as to allow that imposition of the plan and we should have a plan so as to allow the change in the system.

There’s no actual discussion of why the plan. It’s just assumed that having a plan - something, anything - would be a good idea.

We object and we object vehemently. The only desirable plan for the British economy is that Britons get to do more of what Britons wish to do. That we even have to say this is one of the proofs that we’re the only liberals left in the country.

Now, if the plan were to be that government wouldn’t do anything that would prevent utility maximisation - suitably adjusted for third party effects, of course - then we’d be all supportive. But that’s not what’s being suggested, is it? There should be a plan so that those running the plan should be able to tell everyone what to do to achieve the plan.

But then, you know, that’s Mazzonomics for you.

If a share price drops 70% on delisting then that shafts the financial transactions tax idea, doesn't it?

An interesting little event on the stock market:

The Company announces the proposed cancellation of admission to trading on AIM of its ordinary shares of 0.1p each ("Ordinary Shares") (the "Cancellation"), and the adoption of amended and restated memorandum and articles of association (the "Amended Articles") (together, the "Proposals").

It doesn’t actually matter which company (Fulcrum Utility Services as it happens) but what happens next does - the share price drops 70%. Some of that will be the results announced at the same time but this is wholly normal, that a share price collapses on the announcement of its exit from the public markets.

The reason is that liquidity is valuable. Investors being able to buy in if it looks good, leave if it doesn’t, is something investors value. Therefore liquid investments carry higher prices - solely by being liquid - than illiquid. A publicly quoted company therefore carries a higher valuation than a private one.

This then shows why a financial transaction tax is the suggestion of only the very dim. The entire aim there being to tax liquidity so that there is less of it. So, we are to deliberately tax so as to provide investors with less of what they value. That will reduce the amount of investment - because incentives really do matter.

As both we and the European Union pointed out more than a decade ago. An FTT makes the economy smaller by reducing the amount of investment over time. Exactly and precisely because the thing being taxed - liquidity - is something that investors value and more liquidity means higher investment valuations and so more investing.

A FTT makes us poorer. An FTT is a bad idea.

Not a difficult concept no matter how few are able to grasp it.

Why are we wasting resources to *checks notes * save resources?

As we’ve noted before around here the price of doing something is an indication of the resources being used to do that thing. Money is how we deploy the use of resources after all. Labour, land, capital, they’re all resources, they’re things that cost money to buy and or rent.

Which makes idiocy like this very hard to understand:

The Government’s flagship bottle recycling scheme will cost companies ten times the amount that officials previously claimed, industry analysis suggests.

According to calculations by the British Retail Consortium, the planned deposit system for the purchase of drinks bottles and cans will cost retailers at least £1.8 billion a year.

That’s £1.8 billion in resources that are to be used. Sure, others say that it will only be £200 million but the point still stands.

Under DRS, retailers will receive compensation from the Deposit Management Organisation, which collects the returned material and sells it onto reprocessors, for hosting a return point.

The claim being made is that the value of those resources collected and sold will be less than the costs of the collection and sale. At which point, why on Earth are we doing this?

Prices really do work. If something makes a loss then that is subtracting value from our world. This is also known as making us all collectively poorer.

But prices also tell us of the resources being used. A loss is telling us that more resources are being used than saved. The value of those bottles and cans, collected, is less than the cost of the collecting. We are wasting resources in our effort to save resources.

This is, to be mild about it, mad. To be not mild about it this is insane.

All of this before we even start to discuss the amount of consumer time that’s to be spent hauling empties about and stuffing them into machines.

This is a carefully thought out and designed plan to make the people of Britain, the nation as a whole, poorer. Why are we doing this?