We really don't think we believe this, no

From Will Hutton:

Economic dynamism comes not from low taxation but from high public investment and smart ways in which governments help high investment businesses better manage risks.

That would seem to militate against that idea of leaving the money to fructify in the pockets of the people. Which, given its source in the ideas of our namesake we do tend to have some agreement with.

Thus the US high tech sector is symbiotically linked to high US defence spending and in particular innovation spearheaded by the Defense Advanced Research Projects Agency (Darpa).

Well, yes, except Darpa tends to be small amounts to answer a specific question. A million here, a couple there, to see if one specific idea might be made to work, or whether a particular question can be answered. With no political over-ride and no government nor bureaucratic ownership nor intervention into use or roll out. Which isn’t the way any such system would work here of course, not under Mazzonomics at least.

Equally, whether in Singapore or Indonesia, the common thread across Asia is state-led investment and successful industrial policy.

That slightly gives the game away - looking at places which have had, even if only by claim, successful industrial policy does tend to ignore those places which have tried but where it’s been unsuccessful. Like, possibly, everywhere else?

Of course, genuinely confiscatory tax rates force enterprise underground – but the idea that the current British tax regime is that confiscatory is bonkers.

Ah! A testable proposition. So, currently the UK government takes 45% of everything, 45% of all economic effort and GDP.

The US government - at all levels - consumes about 28% of GDP, the Indonesian about 11% (yes, 11%) and Singapore’s some 17% or so.

So it would seem that economic dynamism is indeed associated with less than the UK’s confiscatory tax rates. Even, that fructifying idea has some empirical legs.

As ever, all economics is either footnotes to Adam Smith or wrong.

But we’re prepared to make a bet with Hutton. Even, to give him a free hand. Let’s cut that burden of Britain’s tax regime to the mid-point there, Singapore, and 17% of all economic effort by everyone in the country. We’ll also allow Hutton to play Fat Controller with industrial plans. We do indeed think the growth rate will improve - largely because with tax at only 17% of everything people will be so busy making money that no one will play a blind bit of attention to whatever it is the planners want to do.

As, we would point out, largely does happen in those other places.

Questions in The Guardian we can answer

Why have lithium, nickel and cobalt markets slumped despite the demand for electric vehicles?

The markets haven’t slumped at all. Volumes used and traded have risen substantially - because of electric vehicles.

Prices have slumped but that’s because we have a rational economic system.

It’s entirely true that demand for those varied metals has risen. So, ideally, we’d like a system that increased supply to meet that higher demand. As it happens we use an economic system that has increased supply by more than demand has increased. Therefore prices have fallen.

Ain’t that great?

Now, the details here. As we said yesterday in fact. There is no shortage - not at any likely level of demand for thousands of years - of the materials themselves. There could, conceivably, be a shortage at any one time of people digging holes to get them.

So, we’ve a system that gets people digging more holes. Capitalism means that those who own the organisation that digs the right extra hole get to enjoy hot and cold running LearJets and other necessary Big Boy Toys for the rest of their lives. Free markets mean that anyone who wants to try for that reward is free to do so. Prices provide the information for everyone as they consider whether to do so.

Thus a capitalist, free market, price driven mining and minerals system will have supply rising when demand does - thereby moderating prices again. It’s a great system and one that requires exactly no politics nor bureaucracy.

And here’s what’s really amazing about it. It works for near everything! How cool is that?

Someone should write a book about it.

We really did tell you so about lithium - no, we did

We’re going to do that unattractive thing again. Prance our egos around as we say we told you so.

Core Lithium has stopped mining and has warned of a big write-down on the value of its assets as the collapse in the battery material’s prices takes a heavy toll on Australian producers.

The Northern Territory’s only lithium producer told investors on Friday that it would revert to processing stockpiled ore and suspend operations at its Grants open pit mine.

There’s nothing particularly wrong with this Finniss mine. New, well made, decent deposit, they’ve been producing, the material is up to specification. It’s a fine lithium mine in fact. It’s also, as you can see, now closed.

For the lithium price is now below production costs. Which is one of those really pretty big signals that there’s no lithium shortage.

As we said back in September in fact.

There’s a list out there of some 300 would be lithium mining companies. For that’s what the market response has been - the lithium price rises, men with hammers go out to tap the world. And, amazingly, given that lithium is not in short supply, only in currently short extraction, they find it. The value of lithium in the ground falls further and faster than this 75% fall in the purified stuff too. The share prices of those would be lithium miners are falling - globally and near in unison. Because we’ve found enough and it only took a couple of years. It was also done without politics or even subsidy.

And a year ago. And 18 months ago.

It simply is not true that there’s a shortage of these critical minierals - not in any real sense of there not being enough atoms around. Nor in the sense of there not being enough mineable atoms around. There can be, sometimes is, a shortage of open holes in the ground that people are currently extracting them from. But we’ve a system to deal with that - prices. Prices go up more people dig holes. Supply increases, prices come back down. As the man said, the cure for high prices is high prices.

Now, if that were all then it wouldn’t be worth remarking upon. But every government and non-government is mithering about supplies of critical minerals. The UK govt, the one you and we pay for, has taskforces and ministerial reports about them. Of less than, as one of says elsewhere, sensible activity. The US, the EU and everyone else we’ve noted have similar wastes of bureaucratic egghead time and effort. The WEF and any number of NGOs have teams working on this same non-existent problem.

There is no shortage of minerals and the shortage of holes is cured by prices. There, we’re done.

So, could we please disband all these task forces? Gralloch the bureaucracies and ignore the NGOs? We don’t have a problem and we’ve solved it anyway - with that old one of liberty, markets and prices. As so many problems can be and as so many bureaucratic structures adamantly fail to recognise.

That last is at least understandable, you know, Upton Sinclair. But that’s no reason for us all to allow them to get away with it. So, let’s not.

One of those questions we feel we can answer

The Centers for Disease Control and Prevention has found that adult prescriptions for ADHD medication increased by 7.9% between 2020 and 2021, compared with a 1.4% average annual increase between 2016 and 2020. In 2021, doctors authorized in excess of 30m prescriptions for Adderall, serving nearly 4 million patients.

But over the past two years, many of patients have been unable to procure their prescription, due to manufacturing shortfalls. With the delta between demand and supply widening, some adults with diagnosed ADHD are forced to forsake CVS, Rite Aid, Walgreens and other drug retailers, and turn elsewhere.

So, we’ve a shortage of something that lots of people would like to have. While there are brand names here patents aren’t the problem. We thus need an explanation for why there’s that shortage of supply?

Hmm:

Every year, the DEA sets a quota — a limit on the amount of raw materials for many controlled substances, like Adderall. This is based in part on the Food and Drug Administration’s estimate of need for the drug. Controlled substances can be abused, and the DEA wants to make sure there isn’t more than the necessary amount out there.

Ah, there’s state planning involved. Well, that’s case closed then, isn’t it.

Now, we are willing to be corrected on this point but we don’t know of anything at all that has involved state planning which has produced a sufficient amount of whatever it was. Well, except when there was a glut as a result of subsidy that is.

Which does lead to an interesting question. Given that such state planning never - but really, never ever - leads to the correct amount of whatever being available then why are so many so keen on having state planning?

The Patriotic Millionaires aren't even trying now

We have to say that we’re really very impressed by this:

More than 250 billionaires and millionaires are demanding that the political elite meeting for the World Economic Forum in Davos introduce wealth taxes to help pay for better public services around the world.

“Our request is simple: we ask you to tax us, the very richest in society,” the wealthy people said in an open letter to world leaders. “This will not fundamentally alter our standard of living, nor deprive our children, nor harm our nations’ economic growth. But it will turn extreme and unproductive private wealth into an investment for our common democratic future.”

The rich signatories from 17 countries include Disney heir Abigail Disney; Brian Cox who played fictional billionaire Logan Roy in Succession; actor and screenwriter Simon Pegg;

Given the absence of actual billionaires on their list they’ve called in an actor who plays one on TV. Most impressive we call that.

This is even more impressive:

A new poll of the super-rich shows that 74% support higher taxes on wealth to help address the cost of living crisis and improve public services. A survey, conducted by Survation on behalf of campaign group Patriotic Millionaires, polled more than 2,300 respondents from G20 countries who hold more than $1m (£790,000) in investable assets, excluding their homes – putting them in the richest 5%.

The polling found that 58% supported the introduction of a 2% wealth tax on people with more than $10m, and that 54% thought that extreme wealth was a threat to democracy.

If you ask fairly rich people whether the people richer than thou should be taxed they say yes. This is not, we’d just like to quibble, the same as asking the fairly rich people whether fairly rich people should be taxed more. Nor is it the same as asking rich people whether rich people should be taxed more. For what is actually being asked is “Assuming that you’re left alone should these other folk have to pay more tax?”

We really do insist that the answer to the other question “Should you be taxed more?” has a high likelihood of getting to a different answer.

In fact, one of us investigated this 18 years back. The first in the UK to do so even. We found that in the year we asked about 5 people paid more tax than was legally due by offering an additional amount to the Treasury. Four of those were dead too. Others have done the numbers for different years and they’ve not changed very much.

It is possible in both the US and UK to simply pay more tax. Send in a cheque. You’ll even get a thank you letter. It is also true that often enough there is a difference between expressed preferences and revealed preferences - economists like to insist that it’s the revealed, what people actually do, that tells us what people really want or are willing to do.

So, as we said that near two decades back:

When the tax’n’spend brigade show us their thank-you notes, we should listen: until then we should ignore them and insist that our money remains, fructifying, in our pockets.

In the absence of those proofs of higher payment we have to conclude that the Patriotic Millionaires are - what’s that American word we’re looking for, ah, yes, that’s it - blowhards.

We can't help but feel that there's a solution available here

The World Bank tells us that forests are very important to the incomes of very poor people:

Well-managed forests are an effective tool to helping end poverty on a livable planet, especially considering that over 90% of people living in extreme poverty rely on forests for some of their livelihoods. Forest landscapes also cover more than 80% of the area that Indigenous Peoples occupy, many of whom see forests as the source of their livelihoods, food production, and cultural identity.

Yet, forests remain under threat.

One of the reasons that forests are under threat is that poor people cut bits of them down to grow a crop of runty corn for a year or three before moving to another slash and burn site. Or otherwise over-exploit the resources of the forests so that there’s less forest left.

That available solution being to get on with that task of growing the global economy so that we’ve abolished the sort of poverty that requires burning down a forest to grow a crop or three of runty corn.

This is, after all, what we did. Forest cover in the rich world has been rising pretty much since we became rich. The low point of American cover was the 1920s, for example. That is, rich people are rich enough not to have to carve hardscrabble farms out of the New England countryside and can abandon them and allow the area to reforest. Which is, some will be surprised to find out, exactly what did happen. Those autumnal colour palettes that hundreds of thousands travel to see each year were clear cut fields only a century ago.

Rich humans don’t cut down forests. So, get that last fraction of humanity over the hump and into economic wealth and the forests will be saved.

As we say, there really is an available solution here. We did it, everywhere rich did it, everywhere that becomes rich will. So, that’s the plan. Get rich to save the forests.

Pedantry does, in fact, matter

It’s important for us all to get the details of economic language correct. For encapsulated in certain phrases are a number of concepts and then also guides to action. Take, for example, the idea of public goods. Here’s one current public intellectual trying to do so:

No one is realistically suggesting that there is an alternative to either of these things. In fact, the exact opposite seems to be the case. People want more of the NHS, better education, functioning justice and social care that works, for example, and they want the government to supply them, not because these things are then free, but because they know that the government is the only agency that is capable of delivering these things universally for the public benefit.

These things are what are called 'public goods', which are a supply of goods (sometimes) and services (more commonly) that are provided without the intention of profit being made to all members of society, usually by a government, but possibly by a private sector organisation.

In more detail, a public good is defined as:

Public goods are a supply of goods (sometimes) and services (more commonly) that are provided without the intention of profit being made to all members of society, usually by a government, but possibly by a private sector organisation.

This is incorrect. Yes, this does matter. Here is Wikipedia on public goods which is a good enough definition:

In economics, a public good (also referred to as a social good or collective good) is a good that is both non-excludable and non-rivalrous. Use by one person neither prevents access by other people, nor does it reduce availability to others.

There’s a difference in those definitions. It’s an important one too.

The Wikipedia - and correct - definition tells us what the problem is. If it’s not possible to stop someone from enjoying the item (excludability) and also the enjoyment by one does not affect the enjoyment by another (rivalry) then it’s near impossible to make a profit from provision. Therefore a purely private producer will - likely enough - underprovide such public goods as against utility maximization supply levels.

We’ve thus a problem and so also one that could - maybe - usefully be solved by judicious government intervention.

In health care, for example, my hip replacement is rivalrous with your - we cannot both be in the operating theatre at the same time and having the same piece of titanium implanted. Clearly, a hip replacement is also excludable as the NHS manages to exclude so many from gaining one for 18 months.

Within health care there are indeed public goods - herd immunity produced by widespread vaccination for example. But it’s the herd immunity which is the public good, not the vaccination. And there are different ways of achieving that - the US largely insists that children must be vaccinated before starting school (or kindergarten etc) and the UK by the NHS doing the vaccinations for free. It might even be that one of those is better than the other as the method - but it’s not the vaccination, something clearly rivalrous and excludable, which is the public good it’s the herd immunity.

The definition is also not that profit is not attempted - it’s that profit is not possible. Vaccine manufacturing companies clearly do profit, it’s the vaccination campaigns where the benefit cannot be monetised nor profitable. Another one of those judicious interventions is concerning invention and novelty. Once the new thing is created then anyone can do it - copy the invention, copy the book or song. Thus we think that there will be less than optimal levels of invention, book or song. So, we institute patents and copyrights. Entirely artificial ownership rights which provide excludability and so create the possibility of profit. Maybe this is the right way to do it, maybe not, but that is the story as to why we do.

Where the public goods problem exists then yes, there is a good argument for that judicious intervention. Which may even, horrors though it be, mean direct government provision of the item. Like, say, defence of the realm. Even though we can all see the problems with that we did try competing private providers and we don’t look back on the Wars of the Roses as being a national good time.

But public goods are not goods supplied to the public, goods good for the public nor even publicly provided goods. They’re goods which are non-rivalrous and non-excludable.

As we say this distinction is important. For if we forget about this initial and original definition of public goods then we end up going down the rathole of Mazzonomics. Which, we think we’ve understood this correctly, insists upon the following. Invention is a public good, therefore government does and should subsidise it. On the grounds that not enough people will do it because of the difficulty of profiting from having done it. OK so far. The conclusion then becomes that government should own all - or some part of - the inventions which it subsidised into existence so as to be able to share in the profit of having done so. Which does seem to us to be remarkably confused. The evidence given being that Darpa works just great over in the US. Which indeed it does but one of the defining features of Darpa is that it never does try to take ownership.

Ho Hum.

Public goods are a useful - even true - concept and where identified there is indeed a whole library full of usefully true arguments for, and of effective plans to, judicious government action. But those all actually apply only when we have in fact identified a public good. Not when someone just wants to argue in favour of more government.

Details matter, pedantry is valid.

It's not going to work - New Soviet Man didn't

We’re treated to a rumination on how the world should be managed:

Human ‘behavioural crisis’ at root of climate breakdown, say scientists

Or the paper itself:

In the present paper, we have examined this more deeply, and explore the behavioural drivers of overshoot, providing evidence that overshoot is itself a symptom of a deeper, more subversive modern crisis of human behaviour. We work to name and frame this crisis as ‘the Human Behavioural Crisis’ and propose the crisis be recognised globally as a critical intervention point for tackling ecological overshoot.

The argument becomes, effectively, that we need a new humanity.

True, they miss a significant point when they talk about trying to reduce population growth. That ship has already sailed, peak population is a decade or three away already. We’ve done that.

They are right that it’s population times consumption which is the global total, but this is absurd:

Meanwhile, the quarter of the global population who live below the USD $3.65 poverty line, and the almost half, 47%, who live below the USD $6.85 poverty aspire to achieve equivalent high-end lifestyles, encouraged, in part, by the constant barrage of advertising.

Advertising is what makes humans desire three squares, a roof over their heads and a change of clothes? We think they might be misunderstanding human beings there.

Their call becomes an insistence that we must propagandise everyone into a new mode of existence. Even, brainwash.

Which really isn’t going to work now, is it? New Soviet Man never did turn up to make socialism work despite many decades of actual totalitarianism. Systems which attempt to change humans don’t work, systems which direct human impulses to beneficial ends do.

We do think that there’s a useful point to this paper though. Systems which try to propagandise humans into particular patterns of behaviour are called “religions”. Given that the call here is to propagandise the species into a different pattern of behaviour we think it fair to now point out that this ecological regrowth idea is simply a religion.

And, of course, as impervious to factual evidence as any other such.

We're surprised here - well, OK, no we're not

So an interesting archaelogical find:

Scientists have discovered the remains of a sprawling network of mysterious ancient cities in the Amazon that may revolutionise our understanding of human civilisation in the world’s largest tropical rainforest.

A little-known culture built arrow-straight roads and canals through thick jungle to connect urban settlements where they ate sweet potatoes and drank beer, excavations have found.

The settlements, resembling the Maya’s “garden cities” and which date from around 500BC, are the largest and oldest of their type, suggesting the mysterious Upano people predated the Mayans, Incas and Aztecs in the pre-colonial Americas.

We’re aware of the technology used to find those ruins, giant space lasers measuring the height of the ground from orbit Buck Rogers stuff. Indeed, one of us has used it to find slag piles from medieval mining.

However, the bit that surprises us. There have been a number of these finds of civilisational ruins inside what is now the Amazon jungle. Vast areas of land underlaid with biochar as well - effectively charcoal mixed into the soil.

The implication of which is that the Amazon rainforest - or at least large patches of it - is not something that’s been pristine these past 10,000 or 12,000 years. Rather, large parts of it have been cut down for framing, or burnt for that charcoal. Since when the forest has regrown.

That the Amazon rainforest can regrow, our proof being that it has, seems to be a fairly important fact to us. So we’re surprised that we’ve not seen a swathe of stories explaining this at the same time as we have seen that swathe about these latest archaeological finds.

Hmm, what’s that? If it turns out the Amazon is replaceable then that kills a certain set of environmental stories you say? Ah, perhaps we’re not so surprised then.

Markets and prices are information, even if we don't like what's being said

Jeremy Warner has a possibly depressing article telling us that there’s really no future for Royal Mail - or at lesat, none that preserves it as it is.

But since then, the volume of letters has continued to collapse, falling another third. Reducing the number of days is again just chasing your tail to oblivion.

With so many other calls on the public purse, I doubt subsidy is an option for Britain either, even under Labour. What is essential, however, is that any adjustment in the USO reflects what people and the economy actually need, not what Royal Mail and its heavily unionised workforce want, which is just the protection of profits and jobs respectively.

But it’s also about Royal Mail rising to the challenge of finding better and more efficient ways of delivering parcels and other services to households so as to substitute for the death of the letter.

Now, it is possible - possible because many will use this argument - to argue that privatisation is what has caused this. But that’s not, in fact, true. What privatisation has done is make this clear.

There are very large fixed costs to having the universal service obligation. Very large costs which are not covered by revenue given that fall in volume.

And?

If Royal Mail had stayed as some subunit of government then these harsh facts could be disguised. It’s vilely easy to handwave numbers around inside a £1.2 trillion a year behemoth. A service that privatisation has performed for us is to put the organisation on the one balance sheet, the one P&L, we all get to see the information. This is of great value to us as a society.

Sure, we’d all like the USO to remain. But there’s a cost to that. What the one set of accounts does for us is show what that cost will be - and then we can make the decision about whether we desire to keep that USO quite so much. Maybe we do and maybe we don’t, but at least we’ve now got the information necessary to make the decision.

It wouldn’t surprise us at all to find that just as Great Britain was the first place to have a universal letter delivery system it also becomes the first to not have one. For exactly the same reason, being sensibly ahead of everyone else in travelling along that technological curve.

Do note that we’re not insisting that has to be the answer. It is indeed possible that people think the USO is of such value that it should be subsidised into remaining in existence. What markets, prices and the existence as a stand alone organisation achieve for us is making clear the cost of doing exactly that - at which point, fully informed, the decision can be taken.

Prices in markets are information - however much we might not like the lessons being delivered.

Using France as a guide the subsidy would be of the order of £20 per household per year. £20 to not send a letter but retain the ability to do so, each actual letter would cost an additional £1. That worth it? That’s entirely up to you and your valuations. Privatisation has brought that clarity to the numbers though.