How glorious is the Washington Post cancellation saga
This is just wondrous:
Deterioration of the Washington Post’s subscriber base continued on Tuesday, hours after its proprietor, Jeff Bezos, defended the decision to forgo formally endorsing a presidential candidate as part of an effort to restore trust in the media.
The publication has now shed 250,000 subscribers, or 10% of the 2.5 million customers it had before the decision was made public on Friday, according to the NPR reporter David Folkenflik.
A day earlier, 200,000 had left according to the same outlet.
We’d be willing to mutter that we don’t quite believe those numbers. But say that they’re true. That really is the loss from that decision by Bezos. And no, think not of whether it’s righteous that a man can do what he likes with his own property and all that. Just luxuriate in the event itself.
Capitalist billionairism means that you’ve got a choice. You don’t like the output from one capitalist billionaire’s newspaper? Great, so don’t buy it then. Gain your news from some other outlet. There are, after all, well over 1,000 newspapers in the United States, some of which are even written by adults. There are, other than newspapers, a plethora of other media forms which deliver news to you.
You don’t like Mr. Bezos and his actions? You’re going to cancel and not pay for that rubbish? Good on you. No, really, if you object then you should not spend your money that way. For this is indeed how we bend suppliers - given that precondition of there being a market, with choices - to our will. We like it, we buy it, we don’t like it we don’t. Thus do we increase the production of what we like and reduce that we don’t. There’s even space for some of us to like some forms of supply and not like other - to make choices, that is.
Compare this to other possible arrangements. Say, where there’s only the one truth that can be propagated. There have been systems that did that and we ended up not thinking all that much of them. And for all the jokes that the WaPo has long been Pravda on the Potomac just revel in the freedoms of that capitalist billionairism.
You don’t like it? Then you’ve not got to have it, do you? A freedom apparently a quarter million people have just taken advantage of. Press freedom, nothing quite like it, eh?
Tim Worstall
That proof that the NHS needs reform, not money
As we can see, at no time at all has the NHS ever even had a flat real terms budget, let alone a cut in it. Over a 70 year-ish period it has only, ever, swallowed yet more money.
This is not a stirring tale of increased productivity now, is it? Which is that very argument that it requires reform. Because productivity should increase over time. Technology does march on and things do, thereby, become cheaper to do. If, of course, those new technologies are actually used efficiently to do those old things better and more cheaply. Which the NHS might well not be doing.
We also know how to increase productivity - markets. The Stalinist system of the Soviet Union managed not to increase total factor productivity by one iota in its whole 7 decades and a bit existence. The market economies over the same time period gained 80% of their growth from increasing that tfp.
We need markets in the NHS. QED.
Yes, yes, we know, that insistence that the NHS has its own inflation rate, that it requires a 4% real budget increase each year just to be able to stand still. But that’s just proof of the contention that we require market reform. It’s because the NHS has its own inflation rate that it requires reform.
Tim Worstall
Changing CGT rates will change investment behaviour
This really shouldn’t come as a surprise - changing taxes leads to changes in behaviour. It is, after all, the reason we tax cigarettes so highly, to dissuade people from smokin’ ‘em. The public health lobby is absolutely insistent that raising the price of booze will lead to newspapers being - unusually - written by the sober. Taxes change behaviour.
There is though this current delusion that changing taxes upon investment won’t change investment behaviour. This is not going to be true - taxes change behaviour after all.
Retail investors are piling into the government bond market amid fears that the Labour government will increase the capital gains tax rate on shares in the budget this week.
Why? Because capital gains on gilts are not subject to capital gains tax. A low coupon gilt - of which we’ve got lots and lots as a result of the interest rates of the past decade and a half - currently trades well below par and the return to it is largely the rise in capital value as it approaches maturity. The - low - interest paid is subject to income tax, the capital gain is untaxed. So, rational investors are moving into gilts given the likely coming change in capital gains taxation.
That is, yea even when it’s the rich b’stards deploying their ill-earned loot, taxes change behaviour.
How could it be otherwise?
Thus any change in the taxation of capital gains - or pensions, or inheritance tax, or the like - is going to change investing behaviour.
At which point, well, the government’s declared aim is to increase investment in the British economy. They tell us that we, and they, desire a high investment, high wage, high growth economy. Which indeed we do. Whether they do in fact desire such will become evident when they tell us what those tax changes on investment are going to be.
We’ve already shown that ttax changes behaviour here. So, logically, if they - as opposed to just we - desire that high investment economy they will lower the taxation of the returns to capital. Obviously. There’s not one single person in the country who thinks they will do that of course. But by their actions we shall know them. They’re going to increase the taxation of those returns to capital, from which we can deduce that they wish to reduce investment in the British economy.
Isn’t economic analysis of politics fun?
Of course, there is a really useful solution here. If it’s right that gilts carry no CGT penalty in order to increase investment in gilts then why not simply abolish CGT in the British economy in order to increase investment in the British economy?
Tim Worstall
Measuring Wealth
Amid all the talk of ‘no tax increases for working people,’ it is pertinent to look at the different types of wealth that people have.
The one most people know about is earnings, the salary or wages they are paid for doing a job. This is what they spend to live on and, if they are fortunate enough, to save from, often in housing via mortgages.
The second most obvious one is income earned not from wages but from assets. If people have managed to save enough, they can invest in housing and draw rental income from that. Or they might invest in stocks and shares and draw on the income they yield. In both housing and shares they have the possibility of gains if the value of their assets rises.
A third form of wealth is in the form of entitlements. People in the UK are entitled to a free education for their children, to free healthcare for themselves and their families, and to a free pension from the state when they reach retirement age. These constitute wealth, and it is wealth that can be measured by calculating what it would cost to provide it if the state did not do so.
Surprisingly, many commentators on inequality fail to include this third form of wealth, and therefore come up with a much greater figure for inequality than there actually is when it is taken into account. This form of wealth is particularly valuable for those at the lower end of income distribution because it gives them access to essential services. When benefits are added in, the entitlements raise the standard of living much higher than it would otherwise be, and help redress some of the inequalities.
Much of the current government’s talk centres around imposing a heavier tax burden on those who draw income from assets, and not doing so for those who draw it from wages. The thought seems to be that asset income is less meritorious than wage income. This is simply not true. Those who buy houses to let are increasing the stock of rental properties at a time of a widely acknowledged housing shortage
Those who buy shares are investing in business and in the growth that makes the population richer. Furthermore, they are taking risks that the wage earner does not take. Their gains are not assured, which makes a case for taxing them at a lower rate rather than a higher one.
Capital Gains Tax is particularly iniquitous when it fails to take inflation into account. Inflationary gains do not make people richer, they simply put a higher monetary figure on asset values without any real gains.
Tax policy should be to encourage what is good for everyone, not to penalize it. We want people becoming wealthier, to invest and to save into pension funds. Taxing them more is not the way to achieve this.
You’re gonna have to face it, you’re addicted to tax
With apologies to the late, great, Robert Palmer:
The lights are on, but you're not home
Your mind is not your own
Your heart sweats, your body shakes
Another tax is what it takes
You can't sleep, you can't eat
There's no doubt, you're in deep
Your throat is tight, you can't breathe
Another tax is all you need
Whoa, you like to think that you're immune to the stuff, oh yeah
It's closer to the truth to say you can't get enough
You know you're gonna have to face it, you're addicted to tax
Of course, after that butchering of the lyrics an apology is needed. And yet it is also a very decent explanation of what’s going on here:
It attracts not only locals but also a steady stream of visitors, says Woolston, who claims that free parking is a large part of the town’s appeal.
“People come here knowing they park for a couple of hours free of charge,” says Woolston. “They can go into the local store, pop into the coffee shop, get a bunch of flowers for their wife, or whatever it may be.”
However, Woolston fears this local perk may soon become a thing of the past, as council proposals threaten to drive away shoppers and leave the town centre all but deserted.
His concerns stem from new plans put forward by St Albans council, which involves charging visitors £2.50 an hour to park in bays around Harpenden.
The plans are yet to be finalised but local authority chiefs have warned that “something has to give if a council is to stay afloat”.
The whole idea of having parking charges on a High Street - no, really, back when meters were first used - was not to raise income at all. It was to ensure turnover of parking spaces. If someone comes into town and parks for the whole day then that’s one parking space that produces one car load (which could, of course, be just the one person) of footfall in the shopping area. Free parking for an hour followed by charges makes turnover of that space much more likely. We might, in fact, gain 8 car loads of footfall over the course of the day.
Parking charges were not, not, a revenue raiser. They were a Pigou Tax upon all day parking. As such the correct rates are some free period - say an hour, say - followed by swingeing charges thereafter. £50 for the second hour. You know, maybe.
As we can see the local council is now trying to use this incentive tax as a money raiser - and thereby destroying the incentive the tax was set up to provide in the first place. We want, positively lust after, people coming to do their shopping. This is what maintains a High Street, that community and all that blather. We also want that parking to turn over. Thus free short term plus charges for long term.
This is the political problem with good taxation in the first place. We might - we often do - set up a Pigou Tax to provide the correct incentive, possibly to push people away from behaviours with negative externalities. But the revenue collectors get addicted to that tax and thereby destroy the very thing we’re trying to do in the first place.
Which brings us to fuel duty. Yes, entirely true that the expansion of electric vehicles is going to be a problem for the current system of taxing motoring through fuel duty. Thus all the talk of per mile (which is an excellent economic solution) charges and so on. But there’s a significant point being missed here.
The demand is that the tax revenue from the new system should be equal to the revenue gained from the current system. For they’re addicted to that tax revenue. Throats are tight, they can’t breathe, at the thought of not having that lovely loot to spend. But, and this is important, we are taxing petrol and diesel to cover the externalities of carbon emissions from them. In fact, we’re over-taxing those emissions. The Stern Review states that 11p a litre covers those. The fuel duty escalator has added 25p so far and the talk is of another 7p this week. No, really, the IMF says so here (page 13).
EVs should produce less revenue than the current ICEs. Because there is not that emissions externality that needs to be priced in. But who even notes this (other than us)? And, having noted it who thinks there is that celluloid rat in Hell’s chance of it actually working out that way?
Quite, they’re addicted to tax, they just can’t get enough, can they? Which is the political problem with the good economics of Pigou Taxes. Once politics gets addicted to the loot they’ll not give up the revenue stream even when the externality that justified the tax is gone.
Tim Worstall
Teaching economics to Richard Murphy
We’re not averse to a little bit of teaching economics to people. Obviously. Equally, we’re just fine with musing about a subject, or returning to first principles in order to think through it all again. But we do think it’s a little off that it’s necessary to teach basic economics to Richard Murphy. Who, you know, is a Professor at a British university teaching economic matters to students.
The trigger for this ire is this:
Now, that was what my father employed those staff who were excess to apparent requirements to do when they weren't dealing with an emergency. Those people weren't sitting around on their backsides doing nothing. They maintained the power lines. They kept the system in good order. Those spare people weren't spare. They were the pool of labour that was necessary to keep the system in good order so that breakdowns did not take place. And as a result, by and large, those breakdowns did not take place.
But now a power company will do something quite different. It will outsource the maintenance to a contractor.
That contractor will then subcontract the contract they've got.
In other words, they will let out a contract for a particular power line from A to B, and another one from B to C, and a further one from C to D, and on.
In other words, there will be hordes of contracting going on to get what they think is the best price for the maintenance of each element of the lines for which they have accepted responsibility under the main contract they've been given.
The conclusion then reached being that accountants and lawyers make too much out of this and therefore this must all stop.
And, well, maybe it should? At which point we require a logical structure to enable us to think through that very point. When should a company be vertically integrated, when should there be a company at all? When should there instead be a network of contractual relationships? Fortunately, this has been done for us. Ronald Coase. In fact, he gained his Nobel in (large) part for exactly this work:
Coase showed that traditional basic microeconomic theory was incomplete because it only included production and transport costs, whereas it neglected the costs of entering into and executing contracts and managing organizations. Such costs are commonly known as transaction costs and they account for a considerable share of the total use of resources in the economy. Thus, traditional theory had not embodied all of the restrictions which bind the allocations of economic agents. When transaction costs are taken into account, it turns out that the existence of firms, different corporate forms, variations in contract arrangements, the structure of the financial system and even fundamental features of the legal system can be given relatively simple explanations. By incorporating different types of transaction costs, Coase paved the way for a systematic analysis of institutions in the economic system and their significance.
Note that Coase didn’t give an answer nor series of them. Rather, here’s the logical structure to use to think through and thereby be able to decide on a specific example. When transaction costs are low use the network of contracts, when high the centralised company - to reduce to the acorn of the idea.
As we say we’ve no problem with musing from first principles. But we do think that knowedlge of the standout examples of musing from first principles over the past couple of centuries is perhaps a good idea. In fact, we’d suggest that it’s a pre-requisite for an academic position. That knowledge of the subject under discussion thing. That very thing not in evidence here.
Seriously? Contracting versus central control and ownership without Coase? When this is the very work that led (largely) to a Nobel?
We’d suggest that British academia has a significant problem. For, somehow, people who know no economics have ended up teaching economics. This does not bode well for the future economic understanding of the population, does it?
Tim Worstall
We need better propaganda about renewable energy
The Guardian tells us that utility scale batteries are just great:
From barely anything just a few years ago, the US is now adding utility-scale batteries at a dizzying pace, having installed more than 20 gigawatts of battery capacity to the electric grid, with 5GW of this occurring just in the first seven months of this year, according to the federal Energy Information Administration (EIA).
This means that battery storage equivalent to the output of 20 nuclear reactors has been bolted on to America’s electric grids in barely four years, with the EIA predicting this capacity could double again to 40GW by 2025 if further planned expansions occur.
This is not wholly so. There’s a substantial difference here between what GW means for a battery and what a GW means for a nuclear power plant.
That 20 GW (gigawatts) of power. We use 20 GW of power in an hour and so we’ve used 20 GWh.
OK.
If it’s at night and the wind isn’t blowing so we get those 20 GWh from our batteries. After 61 minutes we have no power at all and civilisation collapses. If we get that 20 GWh from nuclear then at minute 61 the atomkraft hums merrily along and we start gaining our second hour of 20 GW, another 20 GWh. Civilisation does not collapse.
That is, nuclear capacity of 20 GW gives us 20 GW each and every hour. 20 GW of battery power gives us 20 GW once and once only in any on particular use. We’ve got to await wind or morning to get some more.
Battery power simply is not equivalent to nuclear output in any useful manner. They’re different concepts.
We therefore think that we need to have new and better propaganda about renewable power here.
Of course, it’s possible to be cynical - we prefer “realist” - and note that propaganda is the process of misinforming people so that they believe untruths. So, what we’re actually arguing is that we need worse propaganda about unreliables so that people are not fooled into believing those untruths.
Just to remind about dunkelflautes:
Dunkelflauten can occur simultaneously over a very large region, but are less correlated between geographically distant regions, so multi-national power grid schemes can be helpful. Events that last more than two days over most of Europe happen about every five years.
We need 48 times as much battery storage as nuclear output to cover something as foreseeable as the twice a decade opportunity for European civilization to collapse.
Better, worse, you choose, but more realistic propaganda please.
Tim Worstall
Bad Budget ideas - taxing urban commercial landlords less
The latest trial balloon and yes, it’s an absolute stinker:
Rachel Reeves is exploring plans to impose higher taxes on Amazon as the Government races to support Britain’s ailing high streets.
The Chancellor is believed to be considering increasing the business rates paid by online tech giants as part of a wider shake-up on property taxes.
As part of a review of how business rates are set, Ms Reeves could scrutinise how much Amazon’s warehouses pay in tax compared to high street stores.
It comes as retail bosses have also urged the Government to impose new levies on deliveries.
One critique:
And yet, even if it plays well with the focus groups, we should also be clear on one point. An “Amazon tax” is a levy on the most innovative, dynamic and successful sector of the economy. In reality, it will be final confirmation that Labour’s Britain is a hostile environment for growing businesses – and so long as that is true we can forget about “growth”.
Fair enough. But the problem is worse than that. As we’ve pointed out many times over the years business rates are paid by landlords. Yes, the tenant hands over the cheque but the incidence, the pain, of the tax is upon the landlord. No, sorry, if you’re not prepared to consider tax incidence then you’ve no business commenting upon a tax system.
Taxing urban retail less and suburban big boxes more just shuffles which landlords make or don’t. Adding a consumer tax to online sales in order to reduce urban retail business rates shifts that tax burden from landlords to consumers. And why on Earth would we want to do that? Well, unless we were urban retail landlords that is.
We generally tend to think that we stopped running this country in favour of the landed property interest a century and more ago. We should stick with that idea and aim - really, why do we want to tax commercial landlords less?
Another way to put this. Business rates are the closest thing we’ve got - and it’s damn close too - to a Land Value Tax. That most efficient and lovely of all taxes. People are proposing that we do less of this? Rilly?
Tim Worstall
We, gulp, find ourselves agreeing with The Guardian here
Obviously, not wholly and entirely agreeing with The Guardian but:
Instead, this column’s long-held view is that, under a privatised system, water companies belong on the stock market. Only three of the 10 that were privatised still have a listing, and nobody pretends they are all models of virtue (United Utilities’ woes at Windermere being the latest example). But, in the round, environmental performance has been better at quoted companies – boardroom accountability is easier to enforce, financial reporting is more transparent and borrowing is lower. Thames went wrong under Macquarie’s private equity leverage lash-up and then was holed under a slow-moving consortium of faraway funds that overpaid for the assets and attempted to manage by committee.
Publicly accountable capitalism seems like a good enough idea to us. This is in contrast to what is being said elsewhere:
Water companies in England could be banned from making a profit under plans for a complete overhaul of the system.
The idea is one of the options being considered by a new commission set up by the Department for Environment, Food and Rural Affairs (Defra) amid public fury over the way firms have prioritised profit over the environment.
Sources at the department said they would consider forcing the sale of water companies in England to firms that would run them as not-for-profits. Unlike under nationalisation, the company would not be run by the government but by a private company, run for public benefit.
Well, we’ve an example of just that, as the article says:
Welsh Water, which runs under this model, has no shareholders and any surplus money is reinvested back into the business or into customer services.
The problem with that model is that, as that second article itself points out, Welsh Water (tho’ they call it Dwr Cymru, possibly just to confuse) has above average costs right now and under the proposed price changes will be the most expensive.
It’s also not obvious - not enough monitoring is done in Wales for us to fully know but the indications even so are not good - that the environmental performance is any better. If we are to believe multiple George Monbiot columns about the Wye Valley, it’s worse.
We, here, are intensely pragmatic. Sure, we supported water privatisation, helped set it up. But if it turns out it doesn’t work and that there’s another model which does work better then we’ll support that instead, no problem. But if the not for profit model does not work better - as Welsh Water seems not to - then why on Earth are people trying to impose that across the industry?
Ah, yes, we forgot. Capitalism bad, see? Doesn’t matter what the actual results are, look you, it’s just Bad, M’Kay? Performative nonsense instead of what works - that’s really not the way to run a country.
Tim Worstall
Sir Michael Marmot will be most annoyed
An entire lifetime’s worth of theorising destroyed by the one ugly fact:
White people in Britain are dying at higher rates than ethnic minorities because of their drinking and smoking habits.
Analysis from the Office for National Statistics (ONS) of mortality rates by ethnicity across towns, cities and villages found that in almost all cases white Britons were dying in higher numbers, despite on average being more affluent.
Marmot’s insistence is, recall, that economic inequality leads to health inequality. Ineluctably, and that the health inequality we see is caused by economic inequality. Therefore we must raise taxation upon the rich considerably, send that cash to the poor and health will improve. This is also one of the core assertions in The Spirit Level. That it is the inequality itself which makes us iller.
The Telegraph has got the finding from the Office for National Statistics correct. It’s also not just because there are - still - more White Britons around, it’s relative rates. The cause, well, no one’s wholly sure, but a suggestion is that a large proportion of the non-Whites are first generation migrants and that explains their income levels. But also that those who bother to migrate might be generally healthier than the population left behind or arrived in. But it is still true that mortality and ill heath are not running in line with income.
Poorer people have lower mortality rates than richer. Marmot and the Spirit Delusion are wrong.
Ho Hum, well, better luck next time Sir Michael.
Tim Worstall