Grift and rare earths

MPs tell us that China has a stranglehold on those essential rare earths:

Last week, Parliament’s Foreign Affairs Committee warned that Britain’s net zero drive has been left dangerously exposed to a reliance on Beijing for supplies of crucial materials.

The committee said in its report: “In the early 2000s, China began to ‘weaponise’ critical minerals exports, restricting access for political leverage.”

Then China announced a ban on the export of rare earth processing technologies.

China has banned exports of technologies for processing rare earths, the latest sign President Xi Jinping’s administration is hitting back against US-led curbs on advanced computer chip sales to Chinese companies.

Therefore, obviously, taxes must be higher so that MPs can lash out more cash to those with long enough ladles to get into the political gravy. A new orgy of industrial development grift.

Except when we examine the details the justification is rather less. For example, the ban on those technology exports was already there, de facto. We’ve also already got a vast development programme under way in this western world:

According to the International Energy Agency, China accounts for about 60 per cent of the world’s rare earth mining production

The thing is, 13 years ago that was 95%. And then China tried to weaponize its control of mining as we said, back in 2010, all that will happen is that western mines will open. As they did to produce that 60% share today.

We already know the truth of this. China’s dominance here is contestable. So, if they’ll not allow us to have those rare earths nice and cheap then we should contest. And the impetus of current pricing is such that it all requires no subsidy whatever. This really is one of those things that markets unadorned can take care of.

So, you know, we should allow markets unadorned to take care of it. However much politics would enjoy the ladling out, the recipients the arrival of gravy, it’s not necessary to tax Peter to subsidise Paul here. So, don’t.

American wages are higher than British by more than you think

We think we’re all pretty much aware that US wages are higher than UK by and large and in general? To which a fairly usual response is “But free health care!” and therefore Nanunanu or some such. Well, yes, except the way we usually measure wages means that US incomes are even higher, when we consider health care costs, than we think.

This is not an earthshaking point, it’s just one of those little grubby nuts and bolts issues we so delight in around here.

To use comparable figures, for the US: “ Median weekly earnings of the nation's 122.1 million full-time wage and salary workers were $1,118 in the third quarter of 2023” and UK: “Median weekly earnings for full-time employees was £682 in April 2023,” (OK, there’s 6 months of inflation to account for in there but….). Or, on an annual basis, the US is $58,136, the UK £35,464. The FX rate is £1: $1.26. Or perhaps PPP at $1: £0.68. (ie, $1.47). By PPP rates the Americans are still gaining substantially more than Brits.

The US is a richer society, thus wages are higher. The US economy is lower tax, less regulated, than the British. We’ve not found anything here that violates long held prejudices therefore.

The standard response to this is that but, but health care! Americans have to pay for theirs, we Brits get it free from the NHS. Which, at this level of wage measurement, is to get that the wrong way around. For what we are measuring here is wages, not compensation. Compensation is what you get from going to work, not merely wages.

In Britain we gain those wages then have taxes taken off them. Some part of those taxes then pay for the NHS which is then free at the point of use. But UK wages are therefore the £34k minus the cost of health care. USians, on the other hand, gain their wages plus health care. For, for the significant majority of full time employees, health care insurance is something they gain from their employer. And which is not included in this measure of cash wages. It’s part of compensation, not wages.

No, we are not advocating a move to employer paid health care. Of all the varied ways health care can be done we do not think that’s one of the ways it should. We are also not suggesting that doctors should be paid as much here as there and so on. We might just note that for those who do have that health insurance they do actually get to see a doctor in less than geological time and so on but still, the point here is not about health care, it’s about wages.

Yes, who pays health care makes a difference when we compare UK and US wages. But we’ve got to get this the right way around. The standard measures of wages for the UK are before health care costs. In the US they’re after. US wages, when accounting for health care, are even higher than the standard comparison states that is.

Again, UK wages are before the tax to pay for health care. US wages are after employer paid health insurance. US wages are significantly higher than UK when we account for health care costs.

We did say this would happen and Lo! it is happening

We can’t claim to be Cassandra because some people do believe us some of the time. It’s just that more people should believe us more of the time:

But there are growing concerns over the vacuum of lending that has been left in its wake.

Loan sharks and other unregulated lenders are stepping in to replace the likes of Amigo. Buy now, pay later lenders, which offer an alternative form of lending, have also filled the space.

A survey of debt advisers by the Joseph Rowntree Foundation found that 16pc of lower income households were borrowing from unlicensed moneylenders last year, equivalent to around 1.9m households.

The Centre for Social Justice (CSJ) also estimates as many as 1m people in England are in debt to loan sharks, up from 300,000 in 2010.

While the end of high-cost credit is good for customers, what’s replaced it could be much worse.

The reason for this? As we said would happen:

Even though payday loan fees seem competitive, many reformers have advocated price caps. The Center for Responsible Lending (CRL), a nonprofit created by a credit union and a staunch foe of payday lending, has recommended capping annual rates at 36 percent “to spring the (debt) trap.” The CRL is technically correct, but only because a 36 percent cap eliminates payday loans altogether. If payday lenders earn normal profits when they charge $15 per $100 per two weeks, as the evidence suggests, they must surely lose money at $1.38 per $100 (equivalent to a 36 percent APR.) In fact, Pew Charitable Trusts (p. 20) notes that storefront payday lenders “are not found” in states with a 36 percent cap, and researchers treat a 36 percent cap as an outright ban.

The interest rate was capped. It has acted as an outright ban. Therefore people who wish to borrow small sums for short terms are turning to illegal lenders. The one’s where it’s the kiddies’ kneecaps that are the security.

We suggest that this is not a societal advance. As, in fact, we said back then.

Now, we are willing to accept that things could be better. Generally and specifically better. That’s rather the point of believing in free markets, that people can think up better ways and then have the freedom to do them. But we do want to insist upon a very important part of this process.

The bad thing, whatever it is, that should be replaced by the better. Do not ban the bad thing and hope the better then turns up. Instead, invent, develop the new thing and then watch, in astonishment, as it replaces the worse.

Create first then outcompete, do not ban then hope.

Because that second is how the babbie’s kneecaps end up on the line.

It's the 15 months, not the banning of the deal, that matters

As we’ve pointed out before, it’s the time taken by bureaucracy that matters more than the actual decisions:

Adobe is ditching its planned $20 billion takeover of Figma, the app design business, after the deal’s future was thrown into doubt by UK and European competition watchdogs, which said they were minded to block it.

Maybe the block is the right decision, maybe it isn’t. We’d not even pretend to enough knowledge of the sector to know. But we would insist that the actual problem is here:

It (Adobe) will now pay Figma a $1 billion break-up fee, as set out in the agreement they made when the tie-up was agreed 15 months ago.

As we have indeed said before:

This productivity increase - it comes from either doing new things, or doing old things in new ways. As above, this has historically been 80% of total growth. The speed of GDP growth is the speed at which we do those new things or things the new way. This is also the same, in concept, as the speed of productivity growth.

So, now we’ve a bureaucracy taking 15 months to even decide whether they might have a concern about someone suggesting a new arrangement for doing something or other.

Sure, that new thing might be bad. Might be good too. But at some rate of bureaucratic cogitation the time spent to think through it causes as much damage to economic and productivity growth as simply allowing a bad thing to happen.

We’re not getting richer precisely and exactly because we’ve a bureaucracy deciding how we should be getting richer.

The answer is obvious - simply abolish the Competition and Markets Authority. Replace it, perhaps, with something efficient, that doesn’t, by definition, make us poorer. Or a coin toss, likely to do less harm.

Or, perhaps to revive that old joke about why’s there only one Monopolies Commission, we should ponder whether the correct number of CMAs is none or three. The multiplicity would provide the competition leading to thumbs being extracted and decisions reached in less than geological time.#

We’re ideologically opposed to an economy in which the main question about anything new is “May we?”. But if that is the way that it’s going to be can we at least start employing people who can make up their minds in, say, a week?

It's Taylor Swift with the monopoly, not Ticketmaster

It was difficult for people to buy tickets to Taylor Swift’s tour. Yes, really, the world’s biggest pop star sold out her shows - we’re all shocked, right? This is now leading to an insistence that it’s the monopolist selling the tickets which is the problem. We agree, it is. But the monopolist is Ms. Swift - only she can put on a Ms. Swift show - not Ticketmaster, the people who were selling the tickets:

But it also highlights the shortcomings of what critics say is a broken ticketing market that is creaking under the weight of high demand. Touts are able to buy up tickets and sell them on at exorbitant rates, while some concert-goers now face huge increases in ticket prices even if they go direct to the original seller.

Scrutiny is being levelled at Ticketmaster, which holds a dominant position in the market and has been branded a “monopoly” by its numerous critics.

As a bidding war kicks off for a rival retailer, is the ticketing market poised for a much-needed shake-up?

There’s absolutely nothing, nothing at all, in those complaints about how difficult it was to buy tickets other than that Ms. Swift has a monopoly upon being Ms. Swift.

Think on it. There were x million tickets on sale (apparently the tour grossed $1 billion and counting). There appeared to be more than x million who desired to see one of the shows. There’s an excess of demand over available supply.

Yes, it’s entirely true that the Swift organisation was, umm, swift to put on more shows where demand indicated. They tried to up supply to meet demand.

But what would change if there had been two organisations selling tickets to see the shows? Four, 100? Well, not much really. There was still that problem of x million plus desires being greater than the x million supply. Therefore shortages, rising prices, touts and all the rest.

Now, it could be that Ticketmaster has something of a monopoly, it could be that that’s a bad thing. We’re entirely willing to entertain such thoughts and an analysis of whether that’s all true. But it isn’t true that the Swift Tour is a proof of any of those contentions. Simply because the monopolist here isn’t Ticketmaster, it’s Ms. Swift.

The Adam Smith Institute's Response to the Smoke Free Generation Consultation

Following a call for evidence by the Department of Health and Social Care earlier this year, the Adam Smith Institute submitted a response urging the Government to be cautious with its reforms. Covering enforcement and liberty concerns, through to the importance of vaping flavours and heated tobacco for those looking to quit smoking, you can find a summary of our response below.

The OBR entrenches bias, not truth

The Office for Budget Responsibility is doing one thing right - using dynamic scoring. That is, employing the Lucas Critique. If you change the rules then people will change their behaviour. So, we must include changes of behaviour in our estimates of the effect of a change in policy. So far so good. Sadly, as Dr. Goodspeed of this parish (and also a former CEA Chair but that, of course, is trivial by comparison with a position here) tells us by email:

Check out their fiscal multipliers. Small wonder there is such bias in the UK government toward transfers and public "investment" over marginal tax rate reductions. These multipliers are so far removed from the latest estimates that they're almost laughable. For public investment, one of the best experts out there is Valerie Ramey (UCSD, soon to be Hoover), who has a new paper on the macroeconomic effects of public infrastructure investment here. Her work is super accessible here, including this excellent JPE article on multipliers being less than unity regardless of slack.

On taxes, Karel Mertens (Dallas Fed) and Morten Ravn (UCL) have made really important contributions to the study of the macroeconomic effects of tax shocks, including this AER article and this short study of the 2017 TCJA.

For the UK specifically, James Cloyne has done excellent work, eg. here. Cloyne also contradicts HMT's claims about (corporate) tax cuts and inflation here, with additional insights on the effects of corporate tax cuts here and here.

The changes in behaviour being claimed are wrong. As in, not true.

One answer might be to change the assumptions being used to reflect reality. But that’s to miss what the actual problem is. It is true that the OBR’s assumptions all militate in favour of an activist government doin’ stuff. That’s what using multipliers that are too high means - that government doin’ stuff is going to work and it’s going to work great - and so on through their other errors as above. We of course don’t agree and one of the reasons is that the assumptions are, when measured against reality, wrong.

But the problem is larger than just the OBR. It’s with the current style and structure of government - even the wider management of society. We have far too many organisations claiming to have a monopoly on the truth. Which they then impose upon everyone else.

The OBR is used to measure what the Chancellor says - and what the OBR says is observed as being some neutral truth. Which, as above, it actually isn’t. But far too much of life is being determined in exactly this manner. Natural England embeds into everything rather radical views about matters environmental - that’s why it’s run by Tony Juniper. The Climate Change Committee removes discussion of that subject from the front line and puts it into the backrooms of the cabal.

We see this in wider form too. All those fact checkers of what can be determined to be “the truth” that can then be said out loud on social media. About any issue we like to mention too - trans issues, say, or as the current inquiry is showing, what could be said and what could not about covid. It becoming very clear indeed that often enough what could not be said was actually the truth.

We are not about to claim that this is all a plot by Klaus and his Merry Elves from the WEF. We are micro-conspiracists, not macro. Once there is an organisation appointed to be the guardian of the truth then those with a vision for society will gravitate to it. The OBR will be run by the economics types who believe that government action is doin’ good. Who, after all, else would be willing to work for a fairly boring govt dept other than they? Natural England is always going to be run by those with pretty extreme environmental views - like let’s bring back the swamps with beavers just as climate change means the mosquitos will be back with malaria, dengue and Chagas. The CCC will always be the home of those who consider any price worth paying to prevent warming - like £15,000 fines for not selling an EV as is now being imposed upon car manufacturers. The factcheckers on the internet are always going to be those with views and dangnammit, everyone’s got to acknowledge the truth of them. By force if necessary.

By creating these positions with the power to determine that “truth” we have offered positions of power to every prodnose with a view they will insist upon imposing. Which isn’t how a free and or liberal society works. Therefore we liberals and desirers of a free society need to kick back against these positions of power.

It isn’t enough to correct their errors. It’s the positions themselves which are the fatal conceit. Therefore we must abolish the positions. The OBR, The CCC, Natural England, all similar and yes, all that factchecking of Facebook.

That this will allow error is obviously true. But it will also prevent the embedding of error which is what is happening now.

Not that this is an unlikely conclusion for us to reach around here - kill the bureaucracy has long been popular. But it is an important conclusion.

One of those interesting political promises

This is not an attempt to diss a particular political party. It is, rather, to examine what is being proposed:

Labour promises 1.5m more homes in its first term – affordable homes, social housing and new towns – with planning reforms to stop nimbys blocking building.

We, of course, would be delighted if there were 1.5 million more homes. We’d probably mutter that if there were that many new ones then they don’t, in fact, need to be affordable nor social. For if supply is increased that much then all homes will become more affordable. Rather the point of the exercise we’d hope.

But OK, nice ambition. But we’d go that one step further in examining it. Given the current planning laws there is no possibility whatsoever of gaining that amount of new housing in one 5 year parliamentary term. For it takes about 5 years from gleam in the eye of a builder eyeing up a green field to the removal vans arriving with the new furniture. Which means that substantial reforms to the planning process are required to be able to do this.

But if there are substantial reforms to the planning process to enable this to happen then the problem is already solved - we’ve reformed the planning system so that large volumes of new housing can be built. Huzzah!

The British housing problem really does come down to that planning process. Reform that (we suggest blowing the entire system up, properly kablooie!) and the problem is solved. This suggested solution will require planning reform. So, good, let’s do that, let’s reform planning.

Hey, we’re even willing to consider that there might be some loose ends that will then also need tidying up. But let’s crack that core problem first then see what else needs doing.

George Monbiot stumbles upon a great truth

As ever, George then picks himself up and marches on, ignoring the lesson just learned:

Between 2015 and 2020, financial institutions invested $478bn (£380bn) in meat and dairy corporations. But from 2010 to 2020, only $5.9bn was invested in plant-based and other alternatives. Astonishingly, the livestock industry also receives, across the EU and US, about 1,000 times more government funding than alternative products. This includes massively more money for research and innovation, even though meat and dairy are well-established industries, while the alternatives are at the beginning of their innovation phase. Why? Because the livestock industry’s political connections are umbilical.

This is the way politics always works.

Think of housebuilding in Surrey. Those who currently live there have the vote there. They’d like their houses to remain valuable, prefer to have those rolling acres - which they don’t own - to look at. Rather than the housing that people who do not currently live in Surrey but would like to would prefer. But those who would like to live in Surrey are not a political constituency, do not have votes in Surrey. Therefore more of Surrey remains under golf courses than housing.

Politics is driven by extant political power, not by that which might arise if the current order were overturned.

Livestock farming has lips firmly on the taxpayers’ teat because it exists, has votes. Plant alternatives would obviously like some of that cream but they’re not an organised political constituency therefore they don’t get it.

Shrug. This is just how politics works. It also shows why politics is such a lousy way to actually run things. For this kowtow to extant, the existing, is true of all political systems, however democratic or elitist (it will be true of dictatorships, theocracies, was absolutely true of Soviet socialism and so on). The reason this is such a lousy way of running things is that good economic management consists, in large part, of making sure that there’s room - free market entry, a level playing field, all that - for the currently non-extant to arrive.

The only way to get around this is simply not to have politics in business. Or, as above, learn the lesson of the truth just stumbled over. Politics will always favour the extant political community but what we desire is that room for the new to arrive. So, no politics in business. And yes, no politics means no subsidies, no grants, no innovation schemes, for they will always be run by that politics and those extant interests.

Monbiot’s just proved to us why laissez-faire works. Horrifying as he himself would find that conclusion.

Once again, to correct Shelter

No, this is nonsense:

Extra 40,000 people in England homeless this Christmas, says charity

It is constructed by being horrendously misleading:

Research by Shelter finds 309,000 people set to spend festive season ‘in a tiny hostel room or freezing doorway’ after rise in rough sleeping

We have pointed this out before and as long as people try to deliberately mislead we’re going to have to carry on repeating it.

The number of people homeless, as in rough sleeping, is around the 4,500 mark. Or, over a year, perhaps 8,500 pass through that state. That’s not good, we’d all prefer it didn’t happen and we all also need to realise that it is made up of two essential groups. Some number of runaways and the like who tend to get picked up, swiftly enough, by one of the many charitable groups. The hard core is of those with significant mental health, drug and alcohol addiction problems. For whom the problem is not the lack of housing it’s everything else going wrong in their lives. What we should probably be calling the result of closing the asylums and that care in the community provision of a bracing night in the good cold air.

Polly Neate, Shelter’s chief executive, said 309,000 people would be spending the festive season this year “in a tiny hostel room or freezing in a doorway”.

This is Worstall’s Fallacy in all its glory. Demanding what must be done without accounting for what is already done. To a rough and ready estimation some 304,000 people are being saved, by that welfare state, from a night sleeping rough in a doorway. We already have a system which deals with homelessness. One that deals with it pretty well in fact. A 1 - 2% failure rate is pretty good by any standard let alone government performance.

Now, could it be made better? Sure. Should it be? Sure. But it simply is not true that the country has 309,000 homeless people. So let’s not start our analysis of the problem to be solved from that untrue claim.