Tim Worstall Tim Worstall

George Monbiot says organic farming is Bad, M’Kay?

No, he does:

Animal farming ranks alongside fossil fuel production as one of the two most destructive industries on Earth. It’s not just the vast greenhouse gas emissions and the water and air pollution it causes. Even more important is the amount of land it requires. Land use is a crucial environmental metric, because every hectare we occupy is a hectare that cannot support wild ecosystems.

All of which holds for organic as opposed to industrial or chemical farming as well. Organic farming simply is more land hungry - the chemicals are substitutes for land, d’ye see? We require more land per tonne of wheat/corn/oats/peas/whatever under an organic system than we do an industrial. So, organic farming is Bad, M’Kay?

The rest of the column is a complaint about how the meat and dairy industry (definitely overtones of Tom Holt in this) are trying to ban manufactured meat. Which is indeed bad, we agree. But the point here is that if you’ve allowed government to be interventionist enough that it gets to ban things on political (or protection of economic power) grounds then sometimes the bans will be of things you approve of. The only answer to this is to have a government that is not powerful enough, interventionist enough, to go around banning things upon political or economic power grounds.

At which point the joint answer is obvious - minarchy and industrial agriculture. We do think it a tad odd that it’s George Monbiot bringing us this news but then we suppose that sometimes facts just will out, even the most dedicated activist and propagandist does have to face reality sometimes.

Tim Worstall

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Tim Worstall Tim Worstall

An anticapitalist, truly communal, social media network sounds like a great idea

One obvious benefit would be that those who are interested in being anticapitalist, truly communal, could proceed off into their echochamber and leave the adults in peace. Thus we do support this idea from Clive Lewis MP:

Excellent stuff. I’ve been thinking the exact same thing.

However, I’d like @lisanandy at @DCMS to think about what a democratic, open source, transparent, public, bottom-up, cooperative based, social media platform looks like and see it kick-started by said dept asap

The way to do this is to download a copy of Mastodon (there are other alternatives) and start running an instance on the DCMS server. If you don’t know how to do this then we’d suggest corralling any random 7 year old and get them to show you - our memories of VCRs suggest that this is the correct way to deal with any technical difficulties among those rich in years and experience.

If only all political suggestions were this easy - and cheap - to deal with.

Glad we could help here.

Tim Worstall

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Tim Worstall Tim Worstall

We find this really very amusing

Britain’s biggest banks are facing a deadline to repay more than £100bn of pandemic-era loans, which experts say could benefit savers as banks and building societies compete for customers with attractive rates in a “messy” dash for cash.

More than 70 lenders ranging from high street banks and building societies such as HSBC and Nationwide to digital and specialist lenders such as Starling Bank and Aldermore collectively borrowed £193bn from the Bank of England as part of an emergency programme rolled out in the early days of the Covid-19 pandemic in 2020.

It’s really not that long ago that the shrieking was that banks were not increasing deposit rates at the same speed they were increasing lending rates. This made their net interest margin blow out - evident in the accounts and profits - and something must be done. Varied calls were made from increased taxation to someone really must do something - set prices maybe.

All of this when all along it was actually the government causing the problem.

For while there is that Modern Monetary Theory insistence that banks don’t lend out deposits that’s not, actually, usefully true. For banks must have the deposits to finance such loans. And, if they’re getting those deposits, nice and cheap, from the Bank of England therefore they don’t need to up the price they offer to other depositors. Thus the increasing net interest margin. Because they were getting cheap money and thus didn’t need to face full market forces.

The absence of this market aberration will indeed increase the rates on offer to depositors. Good.

And, of course, that this is happening is that very proof that the MMT contention is wrong. Because banks must finance a loan with deposits the effect is that banks do indeed lend out their deposit base. As we can see from deposit rates rising when cheap deposits disappear.

Tim Worstall

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Tim Worstall Tim Worstall

But we know how to solve the EV problem - buy Chinese

Much chuntering about the problem with the electric vehicle market in the UK.

Rachel Reeves has an electric car problem. On the one hand, the Chancellor is part of a Labour government that has pledged to turbocharge the switch to electric vehicles (EVs) in Britain.

But on the other, she is racing to plug a £22bn black hole in the public finances ahead of October’s Budget.

Reeves herself has warned this will require painful choices – but with EV sales already slowing in the UK, experts now fear the Chancellor risks slamming on the brakes with a series of sharp tax rises.

Whether or not EVs really are economic or not is rather clouded by the special tax treatment they get. They’re going to start paying vehicle excise duty for example. And in the longer term there’s that pay per mile (in itself a good idea) tax system a’comin’. EVs will be paying the same as ICEs under that - they must, because the government’s point would be to regain the revenues from fuel duty - and thus EVs are going to lose their artificial price advantage.

At which point adoption is rather going to slow, no?

There’s no real way out of this either. EVs cost vastly more to buy, suffer horrendous depreciation rates and yes, cheaper fuel and lower taxes. Once the tax situation changes they might well not be cheaper. So, err?

Well, there is an obvious idea:

To repeat, the current conversation insists that cheap EVs must be achieved for climate change reasons. China’s taxpayers have spent $100 billion on getting to cheap EVs that we can now enjoy - and also save the climate. But we can’t have those cheap EVs and save the climate…

We just import the cheap Chinese EVs and so save the climate. The people who would lose from this are the local - our own domestic - capitalists who can only make expensive EVs. Oh dear, that is a pity then.

Ricardo for the win again.

Tim Worstall

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Tim Worstall Tim Worstall

Self-checkout - Why markets work Part MMCXV

That there seems to be an awful lot of dithering in markets can be seen - is seen by some - as an example of their faults. Why not replace that havering with the thwack of firm planning. One decision taken once and all that waste gets removed from the system.

The comeback to that is, well, yeees, but which decision?

Morrisons “went a bit too far” with self-checkouts, its chief executive has admitted, as the supermarket chain cuts back on the technology across a tranche of its stores.

Rami Baitiéh, chief executive of Morrisons, said that it is “reviewing the balance between self-checkouts and manned tills” and removing some from stores after installing too many.

He said: “Morrisons went a bit too far with the self-checkout. This had the advantage of driving some productivity. However, some shoppers dislike it, mainly when they have a full trolley.”

So we’ve this new technology. Computing has reached the stage that we can, with greater or lesser success, remove paid labour from the checkout process and replace it with customer - and unpaid - labour at the self-checkout.

Well, could be a good idea, might not be. As with most technological advances we’re likely to find out that some is good, more could be better or worse and all and only worse. So, how do we find out that optimal position?

Folk have to try it. Different folk have to try different amounts of it too. So that we can see the real life and real time reaction of consumers.

No, planning doesn’t work. For of course every single one of these varied companies has done all that planning. They’ve surveyed and asked and prodded and thought and come up with what research and planning says is the optimal solution. Absolutely every single one of those plans has been wrong - no business plan ever does survive first contact with the market.

The one single central plan would not have had that experimentation, that trial by error and we never would haver and mither to the optimal solution.

Which is, of course, that reason for using markets. Haver, mither and dither are not inefficiencies of markets they’re the point. Because only by fiddling about a bit do we actually find out what those difficult things, human beings, actually find the best solution. We also can’t stop doing this because technology changes, perhaps only by some insubstantial in any one day, all the time. Therefore we are continually trying to find the correct mix and thus must continually fiddle about.

Sure Morrisons is ripping out some self-checkout lines. That’s the whole damn point of using markets, to find out that they should.

Tim Worstall

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Tim Worstall Tim Worstall

Wrong policy Ms Rayner, disguising the bill doesn’t make it go away

As an arrow flighting towards the centre of the target politics gives us wholly and entirely the wrong economic answer:

Angela Rayner has vowed to get benefit claimants out of “expensive private rented accommodation” after analysis found that landlords will be paid a record £13bn in housing benefit this year.

The amount of taxpayer money spent on supporting private tenants has surged by 30pc since the pandemic began, rising from £9.9bn in 2019-20 to £12.1bn in 2022-23.

The Housing Secretary has promised to deliver “the biggest increase in social and affordable housebuilding in a generation” as official forecasts predict benefits spending on private tenants will hit £12.8bn this year.

The push will be to provide more social, housing association and “affordable” housing. Instead of just paying the cash to prviate landlords. Which is entirely and wholly the wrong thing to be doing - for disguising the bill doesn’t make that bill go away.

British housing is too expensive for many Britons to be able to afford reasonable quantities and qualities of it. That’s our central starting point. As solutions we have those two ideas. One is to build more of those “affordable” houses on the government tenpence. The other is to provide the cash to tenants to pay to their landlords.

But the cost of housing being too expensive is still there either way. The capital used to build those affordable houses - also the land - could be used in other ways. That’s an opportunity cost and if we’re not to include opportunity costs then whatever it is we’re doing it’s not economics. Further, those “affordable” houses could be rented out at market rent. The gap between affordable and market is a cost of those affordable houses. An opportunity cost again.

The correct answer is to entirely abolish all indirectly subsidised forms of housing and only subsidise through those direct - and visible - cash payments. Yes, we’ll all shriek in horror as the housing benefits bill rips up through tens of billions a year toward the century. Which is exactly the point of the exercise. This is a cost that we have to carry - whichever system we use to deal with it - of the nationalised planning system’s refusal to allow people to build houses Britons wish to live in, where Britons wish to live, in Britain.

The cost of affordable housing is the same as subsidising housing benefit. Better to have all those costs where we can see them so that we finally bite the bullet - driven by shock at the size of the bill - and blow up the Town and Country Planning Act 1947 and successors. Proper blow up - kablooie.

Hiding the bill doesn’t make costs go away but seeing the full bill might well mean we get to grips with the real problem.

Tim Worstall

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Tim Worstall Tim Worstall

We do love the smell of joined up government in the morning

This is not to advocate for one policy or another, rather to insist that one or the other has to be the policy.

Senior advisers to Labour have warned that, with police solving just 5.5 per cent of all crimes, a third of the rate of seven years ago, offenders have become “emboldened” by the low chances of being caught, convicted and jailed.

OK, via Gary Becker we get the insistence that prison - or any other punishment - operates by mathematics. It’s the severity of the punishment times the odds of it actually being suffered which is the incentive. Or disincentive perhaps. So, if the chance of even being found - let alone punished - is only one in twenty then whatever the punishment is there’s not much disincentive there. Or, given the way mathematics works in order to provide a disincentive those punishments imposed, when rarely they are, need to be substantial.

Ministers should scrap Conservative plans to build new mega-jails and pour £4bn into the prevention of crime and rehabilitation instead, the former chief inspector of prisons has said.

Which is arguing entirely the other way around.

We’ve also got the recent events around incipient riots. Several year sentences being handed down without delay. And, of course, that 5 years for the JSO laddie who was up before the beak on his eleventh offence. Apparently significant sentences do in fact work. Or so the claim is.

Our own preference is probably to resolve the maths in favour of certainty of punishment allied with the punishment itself being light enough to act as an efficient disincentive only. Note the probably there. But we still do insist that there actually has to be a policy. Either light-ish punishments applied with certainty or terrifying ones in a lottery. For those are the only two choices that work.

Which to choose could be a matter of taste, as our probably is, or it could be a more practical matter. Which is easier, building more prisons or reforming the police so that they’re efficient? #

Tim Worstall

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Tim Worstall Tim Worstall

Just to remind - there is no market for more gilts, more government borrowing

Just to pick a specific instance of something incorrect oft said:

Up and up goes the national debt, but still there seems to be no shortage of investor appetite for UK gilts.

This is not true. The Household Analogy holds for governments just as it does for households.

There’s a very distinct shortage of investor appetite for UK gilts. This is also trivially easy to prove.

Just using very round numbers the outstanding issues are some £2.7 trillion. For which there is such little appetite that the Bank of England has had to invent money to buy £700 billion of them (about the current QE stock). So, the current market won’t even absorb 25% of what is already in existence. That’s not evidence of no shortage of investor appetite.

If the BoE were to try to sell that 25%, that £700 billion, it would drive prices down and yields up. Indeed, we all expect the BoE to try to sell some portion at least of that QE gilts stock in order to drive prices down and yields up at some point.

So, OK, at current prices then there’s a shortage of investor appetite for gilts. But then that’s always true, isn’t it? We don’t have shortages of things, we have shortages at a price. At current prices there’s a shortage of investor appetite - about £700 billion’s worth in fact. QE is QED.

Which is why the household analogy does work. Sure, sure, governments can just print and all that. But they still face price limitations on credit just like anyone and everyone else - even households.

Tim Worstall

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Tim Worstall Tim Worstall

As ever, planners fail the reverse Chesterton’s

Chesterton’s Fence is the idea that before tearing down a fence it’s worth working out why it was built. For only if you know why it was can you work out whether the reason for it is still valid - or not. The Reverse Chesterton’s is to ask why something doesn’t exist before deciding to create it. It may be - may - that there’s a good reason it doesn’t exist.

So to this idea of food deserts. Places where there just aren’t the shops with the good, fresh, food that we should all be righteously eating.

Over the past decade, state and federal governments have invested millions of dollars in creating grocery stores in food deserts — defined by the U.S. Department of Agriculture as any low-income urban neighborhoods without a grocery store within a mile, and any rural communities without one within 10 miles. These programs continue to expand.

But the Reverse Chesterton’s was never grappled with properly. Vague claims that profit seeking grocery chains just wouldn’t do it therefore….

Many stores that receive subsidies shutter their doors soon after opening or fail to open at all. Capitol News Illinois and ProPublica examined 24 stores across 18 states, each of them either newly established, preparing to open or less than five years old when they received funding through the federal USDA Healthy Food Financing Initiative in 2020 and 2021. As of June, five of these stores had already ceased operations; another six have yet to open, citing a variety of challenges including difficulties finding a suitable location and limited access to capital.

Illinois’ record is similarly disappointing. In 2018, Illinois officials highlighted the opening of six grocery stores that had received startup funds over several years from a $13.5 million grocery initiative of former Gov. Pat Quinn’s. Four of them have closed.

Not enough attention was paid to why profit seeking companies wouldn’t open stores. For the answer is that profit is the value added to the resources needed to open a store. These stores continually make losses - they’re not adding value. Which is why the profit seeking companies wouldn’t and didn’t open them.

The reason the stores didn’t exist, the reason they go bust when they do, is that there’s no good reason to have food stores in such places.

Asking the right questions before doing something - why is it that planners never do bother to do that?

Tim Worstall

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Eamonn Butler Eamonn Butler

The ASI and the Overton Window

The Adam Smith Institute saw another big policy win this week. In 2017 we published a paper by the ASI President, Dr Madsen Pirie, entitled ‘The Fifth Way.’

It proposed the radical idea that local governments should be empowered to buy farmland, give it planning permission for housebuilding, and share the proceeds with the community. The government has just announced that it will implement this.

It is another case of the ASI stretching the Overton Window so that ideas thought outlandish can be brought into the range of what it is possible to consider. Way back in the 1980s Madsen was quoted as saying, "We propose things which people regard as being on the edge of lunacy. The next thing you know, they're on the edge of policy." If we had a penny for every time that has been quoted, the ASI would be rich. We are not rich, alas, because we never received those pennies.

It does, nonetheless, indicate one of the ASI’s greatest strengths. We seem to come up with ideas that seem way beyond what is considered reasonable, and then market them in such a way that they become worthy of consideration. This has happened many, many times, and ‘The Fifth Way’ is only the latest.

Madsen has been working on a paper that proposes radical solutions to ongoing problems in most areas of government ranging through health, education, student loans and overseas development. It’s Overton window stuff and is guaranteed to blow your socks off when we publish it next month. Watch this space.

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