There is no such thing as a permanent monopoly
The German car industry is showing, nicely, the truth of one of the contentions of the late Robert Bork. There is simply no such thing as a permanent monopoly:
But the real threat to German excellence did not come from within. In the early noughties, when the California-based Elon Musk placed a risky bet on Tesla, traditional automakers were staying away from electric vehicles because they did not want to cannibalise existing business, and the Germans were particularly hesitant. The new technology threatened to obliterate their combustible-engine edge and to endanger German suppliers whose components weren’t needed in electric vehicles (EVs). Tesla, backed by the might of the US financial markets, is now worth over $1tn, about seven times as much as Daimler, Volkswagen and BMW combined.
It’s entirely possible for someone to dominate a market at any particular point in time. Why they are able to do that will depend. It might be that they simply are the best at what is being done. There might be some legal barrier preventing competition. The entire set of economic institutions might be so borked as to prevent entry into that no longer free market. Which of these is true will - OK, should - determine what, if anything, is to be done about such market dominance. If it’s produced by excellence then leave well be, obviously. If it’s manipulation, whether by capitalists or governance then change the system that allows that.
But Bork did point out - and didn’t people laugh when he said it about Microsoft - that no monopoly is permanent. Technology changes therefore any dominance is subject to the underlying technology getting away from the domineering producer. Android happened to Microsoft. Electric vehicles are happening to the German car makers.
No monopoly is, ever, permanent. Something that needs to be kept in mind when considering action against dominance at any one point in time. We have this on fair authority after all:
While we look not at the things which are seen, but at the things which are not seen: for the things which are seen are temporal; but the things which are not seen are eternal.
Messing up the entire legal and incentive structure of the economy in order to deal with some inevitably temporary issue of dominance might not be a good idea….
Tim Worstall
Transforming Ugly Buildings
It has been obvious for years that bleak concrete buildings create bleak concrete minds. Now it’s been said by the Centre for Social Justice
Ugly buildings and shabby surroundings are fuelling an epidemic of loneliness, according to a report by the Centre for Social Justice. It says the government should stop creating ugly developments that leave people feeling dejected, otherwise it will “build its way into the social problems of the future”.
People thought in the 1960s that the new way forward was to move on from ‘mock Georgian’ housing and instead build concrete skyscrapers. Vibrant communities of terraced housing were replaced by soulless buildings that assaulted the senses and provided people with no sense of living in harmony with their surroundings.
Draconian restrictions thwarted the wishes of people to live in two storey street dwellings with gardens at front and back. Limits on square footage have given the UK the smallest houses in Europe. The fault lies with the Town and Country Planning acts that have prevented people living where they wanted to live in houses they wanted to live in.
The obvious solution is to pull down those monstrosities and build decent homes in their place. The abolition of the Town and Country Planning Acts will aid that along.
This will take time, but there is an interim low-cost solution that will brighten up the dreary drabness with splashes of colour until the obvious solution can be applied.
Think how faceless tower blocks would look with brightly coloured plastic window boxes festooned with flowers under every window. Red, yellow, blue, green. Dirt cheap, and probably donated free by Fisons or ICI. It would transform and humanize the whole building, adding a splash of colour to dull, grey lives.
Those adept at Photoshop should picture those buildings as they would look thus decorated, and residents should be shown the projected results and asked if they wished it done to their own residences. The best guess must be that they would leap at the chance. The UK’s dull drab blocks could become vibrant and human-friendly, invigorating their residents instead of brutalizing them.
Gain not your economics from The Guardian
This seems remarkably muddled:
But the real step the EU can take towards protecting its economy (and with it, its citizens’ wellbeing, optimism and faith in democracy) involves things that are less sexy than building a spaceship, such as finishing the capital markets union that could enable more European tech start-ups to borrow money. The EU has spent the better part of a decade wringing its hands over the absence of European substantial tech companies compared with the US and China. A big reason for this is that it’s simply easier to raise funds in the US because private and public pension funds allocate a greater part of their investments towards venture capital than European pension funds do.
Venture capital isn’t lending money. Therefore you don’t borrow venture capital. The clue’s right there in that second word of the phrase - capital. The writer, Alexander Hurst, should know this:
His memoir, A Stunning Display of Unbelievable Folly, is a modern fable about money and greed; at its center, the story of how he made—and lost—$1.2 million trading “meme stocks” during the chaotic Covid lockdowns of 2020.
But then perhaps the two are in fact connected, not knowing and the performance?
But yes, obviously things get worse:
Europe already exports tech-startup founders to the US rather than keeping them at home – which, according to a US-based French investor – has resulted in French tech in the US being worth far more than French tech in France. For instance, Snowcloud and Datadog, both founded by French entrepreneurs in the US, are many times more valuable than France’s largest unicorns or biggest recent stock market flotation. A situation where the continent is exporting founders, their startups, and the capital that is funding them makes absolutely no sense.
Interesting, perhaps we can find some manner of resolving this conundrum?
This matters because, as Stanford academic and author Mariejte Schaake argues in the FT, we need European tech to embody democratic values. On that front, the EU should feel vindicated that its attempt to regulate disinformation on social media is the correct strategy. ….Whether through enforcement, some new type of regulatory agency or a future ban on X, this is not a fight the EU can back away from because the existence of European democracy itself is at stake.
And there we have it. That Europe is trying to regulate is why the start ups are elsewhere. Europe insists upon regulating using the precautionary principle, it must be shown that there will be no harm before anyone’s actually allowed to do anything. This does not work in fields where - well, it doesn’t work in any field, but - lifecycles are measured in months. This point is not difficult to find. Marc Andreessen, one of the major venture capital investors of our day (note, not lender) has been pointing this out, for free, upon Twitter (or X, to taste).
The Daily Mash did go a little too far insisting that The Guardian is wrong on everything, always. In their economic arguments we do have to admit that the comma placing seems fair enough, often enough.#
Tim Worstall
Shock, Horror: Government not very good at doing things
Today’s example is from New Zealand:
New Zealand’s prime minister Christopher Luxon has formally apologised to the more than 200,000 children and adults who suffered “horrific” and “heartbreaking” abuse and neglect while in state and faith-based institutions.
The historic apology follows a harrowing landmark report, released in July, which laid bare the scale of abuse that occurred across care institutions from the 1950s onwards. It was the most complex royal commission inquiry the country has held. The judge who chaired the inquiry, Coral Shaw, described the abuse as a “national disgrace and shame”.
As it turns out government is not very good - or even, is appalling - at taking care of children. This aligns neatly with that suspicion that the one grand signifier of not coping well with adult life is having been in care.
There are, of course, difficulties here. Some people are, at some times, simply going to require care from us all. Government is one of those ways we do things collectively. Teasing out cause and effect is also going to be problematic - those events that lead to requiring care will have their effects just as being in care will.
But we do still stick with that insistence that government just isn’t very good at doing things. Our Big Example being the Bureau of Indian Affairs over in the US. Which is:
The BIA works with tribal governments to help administer law enforcement and justice; promote development in agriculture, infrastructure, and the economy; enhance tribal governance; manage natural resources; and generally advance the quality of life in tribal communities. Educational services are provided by Bureau of Indian Education—the only other agency under the Assistant Secretary for Indian affairs—while health care is the responsibility of the U.S. Department of Health and Human Services through its Indian Health Service.
The BIA is one of the oldest federal agencies in the U.S., with roots tracing back to the Committee on Indian Affairs established by Congress in 1775.
Those Native Americans (we do not call them Indians any more) have had their agriculture, infrastructure, education and economy more generally run by the Federal Government for 249 years now. A quarter of a millennium of the Federal Government running things has left Native Americans with the worst education, infrastructure, agriculture and economy of any of the residents of those United States.
This is, as close as we’ve actually got an example to point to, what life for all would look like if government was running everything for all of us. Which is, we insist, useful; that we have before us this evidence that government isn’t very good at doing things.
Yes, yes, there are some things that have to be done by government, things that both must be done and can only be done by government. But given the inability displayed even by the modern and current form of government we’d be better off limiting the power of government to those few and specific cases where it’s both necessary and the only possible alternative.
As ever, the case for minarchy is made by observing real world government.#
Tim Worstall
The British Airways Method of Cutting the Civil Service
When British Airways was being prepared for privatization, it had a staff of 59,000 personnel. Financial analysts said it could be made profitable if that could be reduced to 39,000. This was achieved without a single forced redundancy. The policy was to offer staff tens of thousands of pounds to take voluntary early retirement, and not to replace staff who retired as normal. The policy worked, and the privatized BA became profitable and, for a time, ‘The World’s Favourite Airline.’
A similar model could be used with the overstaffed UK Civil Service. As Elon Musk prepares to cut back the numbers of federal bureaucrats in the US, we might draw inspiration from his attitude and embark on a similar policy on this side of the Atlantic.
A micropolitical solution would involve avoiding outright sackings or forced redundancies, and instead make the terms of severance sufficiently attractive that large numbers will take them, or at least be mollified by the manner of their departure. This follows the British Airways model.
One possibility might be to put many of them on a two-year severance, giving them the choice of continuing to be paid each month for two years as they leave, or taking a lump sum at the outset instead. They could find other employment during those two years.
A start might be made with those who claim to be working from home. They would be paid for two years for not working at all. The next candidates might be those employed on diversity awareness training and decolonization of the service. Those being paid to do full-time trade union work could be included among the first batch. The point would be to start with those whose departure would make little of no observable difference to the service’s output.
But the personnel cuts must go deeper. There are whole ministries that contribute little or nothing to the economy or to societal wellbeing. We might question how far the government should be involved in culture, media and sport, and how many ministries there are that seem vastly overstaffed for any positive impact they make.
While this will cost money in the short term, it is money that is already being spent on keeping them in their positions. It would be, in effect, like a capital investment, paying money now in order to have lower operating costs and achieve greater efficiency in the future.
Previous talk of cutting the number of bureaucrats has come up against Public Choice Theory and Parkinson’s Law. This alternative approach could sidestep those roadblocks and give us a leaner and more efficient Civil Service.
But what if the 27 Club is actually useful?
Apparently this idea of the 27 Club - that famous and talented people all die at age 27 - is not, in fact, true:
It began when Brian Jones, founder of the Rolling Stones, was found motionless in a swimming pool on July 3, 1969. He was 27 and when three other superstar musicians — Jimi Hendrix, Janis Joplin and Jim Morrison — died at the same age over the next two years, the idea took hold that this cluster of premature celebrity deaths could not have been a pure fluke.
A study has now interrogated the urban myth of the “27 Club” and found that while there’s no truth to the idea that notable people are more likely to perish at 27 than other young ages, the notion that they do still has an impact in the real world.
It’s not true yet people believe it, which then makes it in human terms actually true. Because people act, research, look up, as if it is true and therefore, as a human belief, it is true about humans.
This is a useful and important point. The Labour Theory of Value is not true but many believe it is. Therefore, in terms of how society works - or doesn’t - it is useful to at least consider the LTV as being true at some level in a human society (Reader: no, really, it isn’t).
Or, more generally about politics, what matters is not truth but belief. What people believe to be true is what determines their actions, not what is actually true. It is only possible for people to act in accord with reality if they have that explained to them and falsehoods - like the LTV - debunked that society will work optimally or even usefully. Which is as useful an explanation of our existence at the ASI as you’ll come across, explainin’ that reality.
As to the 27 Club we’ve never really believed it ourselves except in one sense. Truly great talent does exist and it makes itself known pretty young too. It’s then lavished with fame and an amount of cash to make Mssrs Gates and Bezos blush. Plus all the opportunities for self-destruction that a teenager plus oodles of cash offer. From which we draw the conclusion that booze’n’drugs ‘n’ staying up late and all that - the rock’n’roll lifestyle - take about a decade to kill you. That is, given what they’ve been doing for ten years, dying at 27 is evidence of the fortitude of the human constitution. Entirely contrary to the pecksniffs who insist that a second doughnut will murder us all in our beds.
But, you know, maybe that’s just us.
Tim Worstall
Who pays tariffs?
As President-elect Trump weighs up the tariffs he has promised to impose, it is important to understand who will pay them.
There is a popular misconception that when a country imposes tariffs on imported goods, it is punishing a foreign government or foreign firms. This is not a mistake made by economists. The tariff is paid at point of entry, and much of it goes to the government that imposed it. It is paid by the importer, a probable wholesaler, who passes it on in the form of higher prices for his or her customers.
The usual aim of the tariff is to make imported goods more expensive so that people will buy good produced domestically instead. It gives the domestic producer an advantage by making the imported version more expensive. The government that imposes tariffs is punishing its own citizens, not foreign ones. It benefits home producers at the expense of home consumers, with the government collecting the money. It thus has a similar effect to a tax increase, in that money goes from the wallets and purses of its citizens and into the Treasury coffers.
Adam Smith pointed out that ‘By means of glasses, hotbeds, and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries.’ Indeed it could. The citizen who buys it gains a bottle of wine for (say) £30. If they buy the imported wine they also have a bottle of wine, but they also have £29 left in their pocket. Buying the cheaper imported good has made them richer.
The domestic government could protect its Scottish winemakers by putting a tariff of £29 on imported wines. This would deny its citizens the opportunity to buy £1 wines, and lead them to buy £30 wine, making them poorer.
Trump’s tariffs will be paid by American citizens. It will make their goods more expensive. True, it might also hit foreign firms and foreign workers be reducing their sales in the US. And their own governments might retaliate with tariffs of their own, making their own citizens poorer.
This is not the way to go. As Adam Smith observed, trade without tariffs makes people richer. The more trade, the more wealth. Tariffs impoverish everyone. They are a bad idea.
MiliEd is making one heck of a bet about dunkelflautes
This is a fairly horrifying chart:
Recent energy generation in Germany - and as noted, this is after Germany has spent €500 billion (we’ve heard higher, perhaps a € trillion) on lots of that lovely renewable energy. Of which there isn’t very much because we’ve a dunkelflaute. A not uncommon (one estimate has this as being a 50/50 chance for a couple of weeks every 5 years or so) event where there’s low cloud and pretty much no wind.
As far as we can tell - it’s always difficult to quite grasp what people are really suggesting in this field - all of that gas and coal needs to be replaced by batteries. Varied Greens, greens and environmentalists won’t allow anyone to build dams and atomkraft is, of course, entirely out, to the extent of being prematurely closed down. So, we can’t use hydro and nuclear.
This is also, as far as we understand it, the intention for this country. That it should be wind and solar and batteries.
Which is a bit of a problem. Given current technologies and the costs of them enough batteries to power the entire country for a couple of weeks would cost more than all the money made by everyone over the entirety of time*.
So, what are people thinking - assuming that there is indeed thought going on? As we say, properly divining what is being thought and said is difficult here. But as we understand it there’s a claim that batteries are going to get much cheaper. The proof of this is that solar did so therefore batteries will. Economies of scale kick in, d’ye see? Thereby making everything so cheap that it works.
Which is to misunderstand how technology works. It is entirely true that solar has got very much cheaper over the decades. About 20% a year, 4% or so a quarter. So, folk point to that and see the correlation with large scale roll out and assume that this will be true of large scale roll out of batteries too. ‘S’obvious, see?
But solar was getting cheaper at 20% a year in the decades before large scale roll out. It’s still getting cheaper at that 20% a year rate. It was getting cheaper at 20% a year during the large scale roll out. Windmills have not been getting cheaper at 20% a year. They weren’t before large scale roll out, they weren’t during large scale roll out and they’re not right now either.
Sure, economies of scale exist. Large scale production of something is likely to become more efficient over time. But the rate at which it does depends upon the specific technology under discussion. It is not possible to look at solar and claim that batteries will do the same. Well, OK, it is possible because that’s what we think people are currently doing so let us amend - it is not sensible to so assume. For it hasn’t happened with windmills, nor many another technology over the centuries.
We’d even agree on marginal efficiency gains through mass production. But not - not necessarily - orders of magnitude improvements carrying on for decades.
Yet - again, as far as we understand it - this is the bet being placed. That the cost curve for batteries is going to be like that for solar. So, all we need to do is insist that capitalism build batteries and she’ll be right. Which is a heck of a bet to be placing. One that really does seem very high risk indeed. Too high risk even.
It could be true that batteries follow the solar cost curve. We’d tend to think not given the limits of what is known about chemistry and so on. But we’re at least willing to entertain the idea. But, umm, what’s the back up plan if they don’t?
Tim Worstall
*Possibly a rhetorical exaggeration but not much of one.
Prices create clarity, d’ye see?
Back in those archaic times that we actually took note of Bill Nordhaus and Nick Stern in our discussions about climate change they were united upon a major point. We have to use prices in order to make our decisions. We have to use prices to make others make decisions too. We can do this through a carbon tax and markets or through cap and trade and markets but prices do have to be the thing. Because only through prices can we actually see - clearly and obviously - what actually is the least expensive method of dealing with the problem.
As an exercise in wishful thinking, Ed Miliband’s response to a new report on his plans to decarbonise the electricity grid within five years would take some beating. He commissioned a body called the National Energy System Operator (Neso) to examine the feasibility of his plans amid widespread scepticism in the industry that it was remotely achievable.
Neso said this accelerated timetable (it was originally planned for 2035) could technically be met but would require a Herculean effort on every front. Nearly 620 miles of new power lines would have to be built at a time when demands for other construction projects were being expanded amid a desperate shortage of workers.
In addition, millions more people would have to be persuaded to turn off their power at night to conserve energy. Most ministers would consider this analysis and conclude that the 2030 target is far too ambitious, even reckless.
Not Mr Miliband. He greeted the report as a “rebuke to those who said it couldn’t be done”. But it hasn’t been done. Mr Miliband is suffering from the zealot’s delusion that simply wishing something would happen will make it so.
It’s not just that. We have no evidence - really, none at all - that Ed’s plans are going to be less expensive than other methods of dealing with the same problem. We have assurances, yes, but that’s all we have. We have our doubts for, fairly obviously, lowering energy prices by using more expensive forms of energy generation seems unlikely.
But say that this will indeed be true. Where, actually, is that proof of the numbers? Once we’ve added in the new grid, the batteries and all the rest?
Which is why the economists were so insistent that we should not have Heath Robinson constructions planned by central bureaucracy but instead must have a system with the clarity of prices. So we know. #
And, yes, this is important. For, as they also note, humans do more of less expensive things and less of more. So, if we decide to deal with climate change in an expensive manner then we’ll do less dealing with climate change. Which doesn’t strike as sensible TBH.
Tim Worstall
How disappointing, AI isn’t going to make us all that much richer
Artificial intelligence could displace between 1m and 3m private sector jobs in the UK, though the ultimate rise in unemployment will be in the low hundreds of thousands as growth in the technology also creates new roles, according to Tony Blair’s thinktank.
Between 60,000 and 275,000 jobs will be displaced every year over a couple of decades at the peak of the disruption, estimates from the Tony Blair Institute (TBI) suggest.
It described the figure as “relatively modest” given the average number of job losses in the UK has run at about 450,000 a year over the past decade. More than 33 million people are employed in the UK.
The aim of economic advance is - always - to kill jobs. Or, to enable us to gain the output without the use of human labour. That’s the same statement. For that means that we can now have that output from the machines, without labour, plus the new output that we devise that newly freed up human labour to. It’s that new output which is how much richer the machines have just made us.
So, when people say that a revolutionary technology will only kill off a couple of hundred thousand jobs that is to insist that the technology’s not, in fact, all that revolutionary.
As we - to excess perhaps - like to point out the tractor is what gave us the NHS. Before the tractor, the basic mechanisation of agriculture, 90% of the population had to work in the fields to feed the 100%. That 10% not up to its knees in mud is what gave us the Navy, cathedrals, the law, books and all the rest. Now we have tractors and only 2% work on the land. That means 98% of the population can work on not-food things - ballet, the NHS, a change of clothes for all and yes, I’m a Celebrity Get Me Out Of Here. The wealth created by tractors is exactly that we’ve the human labour available to now staff the NHS.
“Only a few jobs destroyed” is exactly what proves that the new tech is a bit of a damp squib.
But then this is an estimate from the Tony Blair Institute after all. They’re not even aware that new tech doesn’t, in fact, mean unemployment in the first place. It just means that the newly displaced human labour goes off and does something else - like the NHS.
Tim Worstall