British fashion is being correct, not fashionable
The Guardian complains:
‘Profit is being prioritised over climate action’ – British fashion is falling behind on sustainability
How excellent say we. One useful definition of the word “profit” is the value added in whatever it is that is being done. We like value added. All of us do. Value added is what we consume of course - in the GDP definition all consumption equals all production amd production is measured as value added. The existence of profit, in this sense, is exactly what makes us all richer.
True, we can also define profit as the amount of that earlier profit meaning that the producer manages to retain. We’re only worried about that in the sense of there being enough to incentivise the production of profit in that wider meaning. We want capitalists (or workers’ coops, whatever) to retain enough of the value add to make sure they keep adding value, that’s all.
If sustainability is something that all of us out here desire enough that we’ll pay for it then a profit maximising firm will bow obeisance to that sustainability. If we out here give sustainability the same respect we give to the average catwalk fashion - interesting perhaps but no one’s actually going to wear that, are they? - then a profit maximising firm won’t. Therefore profit maximisation is perfectly aligned with the revealed preferences of the population of consumers.
Thus, despite the Guardian’s shock at this finding, fashion firms are perfectly aligned with the consumer. We out here apparently don’t give the proverbial monkey’s about sustainability so nor do they. How perfect is that profit driven world, eh?
Tim Worstall
Theories that explain everything
Two ways of explaining things are by Intension (with an ‘s’) and Extension.
The Intension is the list of properties that the thing you are explaining has. Thus for ‘journalist’ you might list dealing in news, writing in newspapers or magazines, communicating on current affairs by radio, television or social media.
The Extension is made up of the members of the class. Thus for ‘journalist’ you might list Owen Jones, Polly Toynbee, Charles Moore, Adam Boulton or Nick Robinson. These names convey to the listener or reader the idea of ‘journalist.’
The more properties listed in the Intension, the fewer the number in the class being talked about. ‘Animals’ has a great many members, but ‘human animals’ are in much smaller numbers, and ‘living human animals’ are in even smaller numbers. ‘Living human male animals’ cuts the numbers further, and ‘living human male animals living in Milton Keynes’ cuts them even more.
The more properties that are listed in the Intension, the fewer the number there will be in the Extension, and vice versa. The Intension is inversely proportional to the Extension.
I = 1/E
If there is an infinite number in the class, then E = ∞ and I = 1/∞ which is zero.
This means that if everything is in the class, the Intension is zero. A theory into which everything fits thus has no information content. Another way of putting this is to say that a theory that explains everything tells us nothing. Perhaps it tells us about its holder’s determination to apply a preconceived interpretation to everything in the observed world, but it tells us nothing about that world.
If a Marxist tells us that everything that happens can be explained by the theory, then Marxism can tell us nothing about what happens. Theories have to live dangerously, as Popper put it. There have to be circumstances that would lead us to discard or at least modify the theory if they were to happen.
Einstein, whose theory predicted that two stars observed during an eclipse would be out of their expected positions because their light would have been bent by gravity, could have seen his theory contradicted if this had not happened; but it did happen.
There appear to be no circumstances in which the theories of Freud or Marx could be contradicted if everything that occurs can be explained in terms of the theories. Their adherents use them to explain everything in terms of the theory, and theories that explain everything tell us nothing.
If everything that happens is confirmation of the theory, it has zero content.
Why, yes, markets work even in housing
There’s a long string of people out there who insist that housing just isn’t like any other market. Financialisation, or assets, or everyone needs a home, or summat. Near always the introduction to reasoning which insists that actually, therefore, politics and the State must be the provider of said housing.
This is not, in fact, true:
Over-optimistic house sellers who end up having to reduce their asking price typically see the property take more than twice as long to sell as those more competitively priced from the outset.
The finding comes in analysis from Zoopla, the property website, which said that while all key measures of activity in the housing market are higher than they were at this point last year, it remains a buyers’ market.
If you try to sell a house at higher than market price then you can’t. You have to then lower the price - which takes the time - and then you can indeed sell the house. That is, house buyers are rational - they’ll not pay more than market price - and that forces sellers to be so too.
We have simple and obvious market effects going on here that is. Which does indeed mean that housing is a market like any other. Supply, demand, prices, we’re in that Econ 101 world.
Which is fortunate because we know how to deal with an Econ 101 world. It’s not exactly a startling proposition that near all of us - other than those currently trying to sell a house - think that the market price of houses is too high. In the Econ 101 world we therefore only need to build more houses, increase the supply of them, and we’ll lower house prices.
So, as we’ve been known to say. Blow up the Town and Country Planning Act 1947 and successors, proper blow up - kablooie. Job done. For if we simply allow people to build more houses then more houses will be built - the price is high, right?
Tim Worstall
Reforming Capital Gains Tax won’t increase tax revenues
Obviously an amusement at the nominative determinism here:
Rachel Reeves is about to hoodwink Britain with a disastrous tax raid
How Thatcher’s chancellor could be the unlikely inspiration for Labour’s capital gains tax
Adam Smith
However, in all this talk of how capital gains tax is to be reformed the one thing we’ve not seen mentioned. It’s not going to increase tax revenues very much if at all.
The Resolution Foundation describes the current CGT regime as a “source of unfairness in our tax system” and Dan Neidle of Tax Policy Associates wrote that “it’s inequitable that a type of income received mainly by the wealthy is taxed less than other types of income”.
These arguments are persuasive on the left of centre and frankly quite compelling to the general public. A number of high profile, new Labour MPs such as Torsten Bell, previously head of the Resolution Foundation, have been making them for years and I assume would continue to do so.
So, fairness, equity and all that. Fair enough.
To try to counter those groups Rachel Reeves could turn to an unlikely source of inspiration for a Labour Chancellor: Nigel Lawson. When he equalised capital gains with income tax in his 1988 Budget he argued that “taxing them [capital gains and income] at different rates distorts investment decisions”.
Also fair enough. But it’s still not going to increase tax revenues very much if at all.
For back when Lawson did it he included an inflation adjustment. Indexation that is - and that has to be a part of the calculation of what the capital gains tax rate should be.
Think on it. As the BoE calculator tells us inflation over the past 5 years has been 24% (or, more accurately, that what cost £10 then costs £12.40 now and we’re not going to bother with adjusting that to a proper inflation rate because our maths is not up to that, not up to even working out whether that is the correct inflation rate). Or 15 years 54% and 25 years 85%. So, obviously there needs to be indexation because why would we tax people on gains made purely from inflation?
When the CGT rate was dropped, as it was, to lower than income tax rates the indexation allowance went as well. And the calculation was that, over all collections and over time, the revenue yield was going to be about the same. A lower rate, but charged upon purely inflationary gains as well as real, would collect about the same amount of tax as a CGT = IT rate with indexation. Well, OK. But that then means that if we change the system back, CGT rates are now to equal IT rates but we bring back indexation then the revenue collected is also going to be about the same. So, sure, maybe the change makes sense in some political meaning of “fair” but it’s not going to do much for revenue collection.
Shrug.
Obviously indexation will come back as well. For the current analysis is that Britain’s economy lacks that patient and long term capital necessary for truly useful investment and economic development. So of course no one’s going to bring in a capital gains tax where the rate increases the longer you hold the asset now, are they? That would just be ridiculous, insane even. Hold an investment for 25 years, there’s an 85% gain that you’ll be taxed 45% upon but that gain is purely inflation and so you’re paying tax to not even be able to stand still?
No, obviously, indexation will come back as well as the equalisation of rates and there will be no more money for anyone to spend. At which point really, why bother? Other than the political optics of course.
Hmm? What’s that? You think they’ll equalise rates but not bring back indexation? Ahahahahaha, gurgle, snort, aha, aha, aha. No, really, there’s no one in Britain that damn’d insane. Not even in politics.
Tim Worstall
The trouble with inflation is that eventually the money’s worth nothing
We all know of the grand experiment in the Magic Money Tree of recent years of course.
According to the lore the last print run wasn’t worth enough to buy the ink for the next print run.
But there are other examples. We’ve always been very taken by De La Rue’s problems over printing money for Venezuela:
The British banknote printer De La Rue reported an £18.1 million ($22.8 million) “exceptional charge” on its annual results due to unpaid bills from the Central Bank of Venezuela, as its chief executive resigned.
The obvious solution, simply sell the banknotes to pay the bill for printing the banknotes couldn’t be used. For no one other than the Central Bank of Venezuela was willing to pay for “strong” bolivars and the CB of V wasn’t able to.
But Modern Monetary Theory insists that those aren’t fair cases. A proper government (“proper” here having definite colonialist, even eurocentric, overtones) can’t end up producing so much money that it becomes worthless. Why, they can insist you must pay taxes in that currency and that will always support the value.
The Royal Mint has left millions of unwanted 1p and 2p coins abandoned in warehouses across Britain as speculation over the future of copper coins grows.
Roughly 260m surplus copper coins worth around £4m are piling up after being stored indefinitely in cash centres across the country, industry data shows.
This includes roughly 150m – or two thirds – of all the 225m 2p coins in the UK as well as 110m of the 200m 1p coins that have been minted.
The amount of surplus cash is now so large that the total volume is the equivalent of more than 2,000 washing machine-sized cages – each weighing a tonne – filled with coins.
No one wants them as coins (tho’, to be fair, we’d happily take delivery ourselves, shipper pays of course) so they’re worthless? Well, melt them down for the copper then!
The Royal Mint, the official maker of British coins, has not recycled or melted down surplus coins since it closed its smelting facility more than a decade ago.
Tsk, Tory austerity, eh? Except, no, not so. Traditionally we made coppers from a copper, tin, zinc alloy (a “bronze”) but copper and tin - especially tin - are far too valuable to be used in mere money these days. They’re now steel with a copper coating. That is, they used to be worth melting down and now they’re not. So close that furnace then - to say nothing of the required tech being entirely different anyway.
But, but, steel has a scrap value, right? And indeed it does. But in steel scrap the thing to look out for is “tramp elements”. Things that wander through the system when you don’t want them to do so. Copper being the big bugbear in steel recycling. Therefore copper tainted steel doesn’t, in fact, have that much value. Possibly even a negative value given the cost of transport.
So, yes, even a “proper” money issuer like the UK has managed to make the money of the country - even though you can pay your taxes with it! - valueless. Magic Money Trees have their problems, see? The difference is only the speed at which it happens.
Tim Worstall
C Northcote would approve
CN Parkinson that is:
Peter Bridgewater has a clear message for the International Whaling Commission (IWC) that he once led. The organisation – which played a critical role in ending whale hunting in the 1980s – has become a zombie institution that should vote to disband itself at its meeting next month.
“The commission did great work, but that was last century,” Bridgewater told the Observer last week. “Today it has – like so many other international conventions or organisations – outlived its useful life and should be quietly disbanded.”
Some take Parkinson’s Law to be that work will expand to fill the time available for its completion. We tend to take another lesson from the book which is that bureaucracy will, inexorably, expand (as in the essay in The Economist, the last useful article published in that source). The job and duty is therefore to be continually, inexorably, pruning that bureaucracy in a countervailing manner.
Another of C Nothcote’s derived points was that a bureaucracy strives simply to continue to exist - as with any other lifeform. The only way to properly curtail the attempts at continued expansion is to kill, not merely prune.
So, yes, kill off an international bureaucracy and the Montreal lot about the ozone hole - now solved - also seem to be being discussed. Excellent.
But we think we should go further - as we always do think we should go further of course. The essential job of any management - private, state, anything - is to continually prune, kill off, those bureaucratic barnacles upon the ship of state or enterprise. To continually strive to close down things to avoid them becalming the whole effort.
Markets contain their own incentive, those that don’t do this go bust. But governance? Some way back we actually suggested a Viscountcy for any Minister who successfully closed down their own department. We should revive that perhaps. Would have to be proper close down of course. Raze the buildings, sell the workforce back to the private sector, plough the ground with salt, the full Carthaginian. But why not? After all, a Viscountcy is pretty cheap to create and there’s no right to sitting in the Lords that goes with it - it’s an award, not a thing.
Possibly we should extend the idea. Manage to close down a smaller bureaucracy and gain a lower level award - GCMGs, CBEs and possibly the MBE for sending only a handful out of comfy offices into the howling gales of the marketplace? After all, we do want an incentive for public sector managers to curb the growth of bureaucracy and we’ve not got any other one at present, do we?
Tim Worstall
We do tend to think this isn’t a good idea
Obviously we think this is a bad idea:
Labour’s biggest union backer is demanding that Rachel Reeves imposes a wealth tax on the richest 1 per cent to give public sector workers a pay rise.
Ahead of the Chancellor’s first Budget in October, Unite has put forward a motion at the Trades Union Congress to demand the levy to raise billions for public services.
The motion from Unite, which gave Labour almost £2 million in the year up to the election, says such a tax would raise £25 billion a year and could be used “to give public sector workers a 10 per cent pay rise”.
Now several whys we think this is a bad idea are obvious. Wealth taxes are a bad idea because of deadweight costs. Every tax, by its existence, destroys some amount of economic activity. Wealth taxes do this more, per £ revenue raised, than income or consumption taxes. Therefore if more money is required then we make ourselves poorer by raising it through wealth, instead of income or consumption, taxes.
Then there is the point that we think government should not have more revenue anyway. Currently they’re getting 40% of GDP, 40% of everything, and the plan is that this should rise. We’d very much prefer 30% and number go down. We really do believe in that fructifying in the pockets of the populace idea.
But let’s be more specific. The current fashionable analysis of the UK economy is that it’s locked into a low investment and therefore low wage disequilibrium. We need to increase investment - possibly substantially - to shock it back into the preferred high investment, high growth and thus high wage alternative. At which point the insistence is to liquidate the current capital stock of the country to pay the wages of public sector workers?
How does that get past however few synapses are being employed here?
Tim Worstall
Mazzonomics does seem to ignore opportunity costs
And, as the saying goes, if you’re going to ignore opportunity costs then whatever it is you’re doing it’s not economics:
The festivities are open to everyone, thanks to the community-led, non-commercial efforts of the Carnival Village Trust (CVT), a registered charity, with funding from the Greater London Authority, the Royal Borough of Kensington and Chelsea, and Westminster Council.
That funding of the Notting Hill Carnical is a cost. Obviously.
Like other cultural events and community initiatives, however, the Carnival has increasingly faced difficulties securing funding. This is part of a broader crisis. The arts and culture sector contributes more than £125 billion to the UK economy and employs more than 2.4 million people, yet it has faced severe funding cuts, and public spending is far below that of Britain’s European neighbors.
All of that funding is a cost, obviously. At which point we want to know what are the benefits? Sure, a great party, that’s a benefit. But among those things being counted:
Performing in the bands, building the floats, designing the costumes, cooking the food, and contributing in other ways generates roughly £100 million in economic value.
All of those are costs, not benefits. They are the effort that has to be put into having a damn good party. Those efforts could also be directed elsewhere - opportunity costs. It may well be that the party is worth those costs, that the other opportunities produce less value from those inputs. But we really must - because opportunity costs - insist upon counting inputs as costs, not benefits.
One million working hours are devoted to designing and hand-making the 15,000 costumes on display and rehearsing the performances of more than 80 bands.
One million working hours at minimum wage is what, £12 million? About? That’s a cost of the carnival, not a benefit of it. Those million hours - worth that £12 million - could be devoted to weeding the parks, caring for the old, finally building a ferry for Scotland or lauding La Mazza. Any of which might have greater value - opportunity costs - than the grand party. They’re a cost, not a benefit.
The festival creates a hive of productivity that
Labour spent upon something unpriced, by definition, reduces labour productivity.
The Notting Hill Carnival is a perfect example of why we need a new narrative for policymaking and economic development. The arts should be seen as a core governmental responsibility, with the long-term finance it requires viewed as an investment, not a cost.
As ever we tend to think that before designing a new economics we should understand the old. Inputs into a process - labour, say - are a cost of that process, not a benefit.
Actually, that’s not even economics, is it? That’s just basic accounting.
Tim Worstall
To repeat our insistence, tax avoidance is not a thing that exists
This is, of course, amusing.
A snail farm in an office building linked to a company that describes itself as the “Canceller of the Exchequer” is an attempted tax avoidance ploy, a council has said.
Snai1 Primary Products 2023 Ltd has been keeping about 15 covered crates containing snails on the lower ground floor of 9 Dale Street, in Liverpool city centre, for the past year, according to the BBC.
We’d all probably file that under nice try, never mind. But it’s this which is the important part:
City Council confirmed that Snai1 Primary Products has not made an application for the exemption of business rates and no official probe is underway.
A spokesman for the council said: “The misuse of the agricultural exemption with the use of ‘snail farms’ in commercial premises is a business rates avoidance tactic that has been attempted in Liverpool.
“To date, no agricultural exemption has been awarded on commercial premises and the council’s business rates team continues to monitor the situation closely and will not hesitate to take further action and challenge such tactics to protect public funds and maintain a fair and efficient tax system for all ratepayers.”
Tax avoidance isn’t, actually, a thing. It is, even at its worst, an attempt but still not a thing.
There is tax compliance, otherwise known as obeying tax law. There is tax evasion, otherwise known as not obeying tax law. That second is a criminal offence, obviously. Tax avoidance, however, is not a thing, not a state of being. It’s an attempt, a process perhaps. Where tax law is less than clear it is possible for there to be differing explanations of it, results from those explanations. But such cases do get examined and we end up with a determination that the attempt resolves down to tax compliance or tax evasion.
Think of the oft quoted Vodafone and £6 billion in Luxembourg and all that. Contrary to everything you’ve read in the likes of Private Eye this revolved around whether the Controlled Foreign Companies (CFC) rules applied to subsidiaries within the European Union or not. If the whole escapade had been done through Bermuda then all agreed tax would be due. If Luxembourg, well - and the end result was that it wasn’t. Sure, the issue bounced up and down the courts for a bit but the Cadbury case made the final result clear and obvious. Not until those profits were moved back into the UK would they be taxable in the UK and when they were they were. Or the Boots complaints - no, interest on debt is a deductible expense for a company. Or so may other of the varied whinges we’ve heard over the years.
It’s possible for there to ba an attempt at tax avoidance, possible for there to be accusations of such. But all do finally collapse down to “This is legal” and therefore tax compliance or it’s not and so tax is due. Tax avoidance simply isn’t a thing it’s, at worst, a process.
Tax avoidance, unlike tax evasion, is not a criminal offence.
Of course not. Avoidance is like an accusation of any other form of criminality. Something to be investigated, evidence to be gathered, but in any system which includes the rule of law is something that does - can, might - sometimes collapse down to “This is fully in order. Sir”.
Tim Worstall
George Monbiot says organic farming is Bad, M’Kay?
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