As we’ve said before there’s something a little odd about UK inequality

We’re often told that the UK is one of the most unequal countries in Europe. We’re also often told that this is bad, very bad, and something must be done. We’ve pointed out a number of times that there’s another difference in the UK economy, something that makes us rather different from other European economies. And that’s the massive importance of London in our economy. In the latest release of figures from the ONS we can see this quite clearly too:

The UK’s highest earners live in Wandsworth, Westminster, and Richmond upon Thames – all in London.

The weekly wage of the average worker in those areas was £660.90, £655.70 and £655 respectively in April 2014.

At the other end of the spectrum, the average weekly earnings of someone in West Somerset were just £287.30.

The ONS prefers to use the median as its measure of average earnings “as it is less affected by a relatively small number of very high earners and the skewed distribution of earnings”.

Because we’re using the median we’re not just recording those bankers in the City there. This is the number which 50% of the people earn more than and 50% less than in each area. And a goodly part of that recorded UK inequality is because of these regional differences in income.

It’s also true that living costs vary wildly across the country. Most especially housing costs of course although that’s not all. London prices for a pint would choke a fellow from West Somerset just as much as rents or house prices would do.

Given that this is all so then actual inequality is rather lower than we’re always told it it. For, of course, we should, if we’re going to be concerned about inequality at all, be concerned about inequality of consumption. And if people in one part of the country have higher wages but also face higher living costs then that’s an inequality that shouldn’t be concerning us.

In no other European country is the capital such a dominant force or influence in the economy,. Thus our inequality is different from their: and arguably our inequality is lower than it is elsewhere, given this specific difference.

Why we should cut alcohol and tobacco taxes and why we can’t

The socioeconomic profile of drinkers and smokers across countries are similar. Smoking and drinking is more prevalent amongst the less fortunate, the disadvantaged and the uneducated. In the UK, it is no different. Hiscock, Bauld, Amos & Platt (2012) found that smoking rates were four times higher amongst the disadvantaged versus the more affluent (60.7% versus 15.3% – the factors that determined disadvantage included unemployment, income, housing tenure, car availability, lone parenting and an index of multiple deprivation).

Fone, Farewell, White, Lyons & Dunstan (2013) found that “respondents in the most deprived neighbourhoods were more likely to binge drink than in the least deprived (adjusted estimates: 17.5% versus 10.6%…)”. Clearly, the incidence of these taxes falls disproportionately on the disadvantaged.

People often smoke and drink for pleasure; this means that these taxes stifle those with fewer resources from attaining pleasure. Conversely, affluent people generally have less trouble substituting consumption goods or in quitting substance use altogether. This prevention of stress alleviation and pleasure attainment will be reflected in sub-potential labour productivity.

The Biopsychosocial model of health suggests that any biological health benefits could be offset by the emotional and financial strain that these taxes induce. The situation is worse for those who are both addicted and poor since they substitute consumption even less than their poor, non-addicted counterparts (thereby reducing their consumption of other important goods). This simultaneously deprives their dependents (quite often children).

A primary concern is that the increase in smoking and drinking will cause several negative externalities (especially in the form of increased healthcare costs). One should consider that, if a drinker or a smoker is aware of the threat of liver failure or lung cancer and yet they choose to ignore it, it is ultimately their choice, their body and their health. A certain degree of respect must be afforded to choice especially since we cannot fully empathise with others.

However, one’s disregard for one’s own health often incurs costs for taxpayers whilst, personally, there are negligible financial costs. In this sense, many may feel disinclined to take care of their health as they might have if treatments weren’t free. So whilst the NHS is still around in its current form, it makes (some, albeit limited) sense to heavily tax alcohol and tobacco. Alternatively, a healthcare system that is at least partially privatised (e.g healthcare vouchers) would enable lower taxation of the disadvantaged and impoverished.

Are we innovating less?

According to Huebner (2005) the per capita rate of innovation has been falling steadily since roughly the middle of the 19th century. He constructs an index of innovation by looking at independently-created lists of events in the history of science and technology and from US patent records and compares them to the world population.

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Woodley (2012), looking at the numbers for a different purpose, compared them with three alternative indices of development, and found that they correlated well with different numbers gathered for different purposes. For example, they correlate highly (with a coefficient of 0.865) with the numbers in Charles Murray’s Human Accomplishment, which quantifies contributions to science and arts partly by how much space encyclopaedias devote to particular individuals.

It also correlates 0.853 with Gary (1993)‘s separate index, which was computed from Isaac Asimov’s Chronology of Science and Discovery. Finally, it correlates with another separate index, created in Woodley (2012), computed from raw numbers in Bryan Bunch & Alexander Hellemans (2004) The History of Science and Technology, and divided only by developed country population numbers in case there is something special about them in creating innovation.

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The result seems quite robust, although I am hoping my friend Anton Howes (who has an excellent new blog on the industrial revolution, and is working on a PhD on innovation and the industrial revolution) will construct an even better index. Should we worry?

There are a few reasons for optimism. Firstly, the population is going up, so per capita declines in innovation are being counteracted by there being more people around to innovate. For example, even if Gary (1993) is right in thinking there has been a roughly five-fold decline in per capita innovation in the past 100 years—there has been almost a four-fold increase in population, balancing much of that out. Secondly, some of the innovations we are getting will allow us to raise our IQ—including genetic engineering and iterated embryo selection—and we know that IQ is one important factor in innovation. Thirdly and finally, there are many countries (such as China and India) who have so far been too poor to have many of their population engaged in innovative activities, but who will surely soon be.

The point about visa systems is that they are reciprocal

We don’t do party political partisanship around here so allow us to tip toe very gently through this latest proposal from the Labour Party over visas, tourist taxes and waivers. There’s a significant problem with what is being suggested: the end result will be a tax on British people who decide to go to other countries.

The proposal is the following:

Labour will seek to beef up its pitch to voters on immigration with a pledge to pay for 1,000 extra border guards by imposing a charge on visitors from the US and 55 other countries.

Yvette Cooper, shadow home secretary, will criticise other parties for engaging in an “arms race of rhetoric” on the issue, which has been thrust to the centre of political debate by the rise of Ukip.

But she will accept that the opposition “needs to talk more” about public concerns and will say action to restore public confidence that illegal entrants are being caught and dealt with is “vital for a progressive approach”.

Under the proposals, nationals in countries enjoying a “visa waiver” system of fast-track permission to enter the UK will be hit with a charge of around £10 per visit, which the party said would more than cover the £45m cost of the additional staff.

Leave aside what the Tories say about it (roughly speaking, “Yah! Boo! Sucks!” as far as we can see) and leave aside the silliness of such hypothecating of taxes (the amount that we should or desire to spend on one particular thing has absolutely nothing at all, whatsoever, to do with how much we can raise in taxation from either that or any other specific thing. All taxation should be flowing into one pot to be distributed. Think, for a moment, if such a visa tax reduced the number of people arriving legally. Would that reduce our need for more immigration officers to deal with people arriving illegally? Not obviously, but under a hypothecated tax system it would reduce the budget for them).

And consider simply the fact that all visa arrangements are reciprocal. If we demand a visa from the citizens of Dystopia then Dystopia will demand visas from Brits. If we offer a visa waiver scheme for visitors from Utopia then Utopia will offer a visa waiver scheme for Brits going there (Utopia, obviously, being that mythical place where the NHS works).

If we impose a charge on people from 55 countries for a visa waiver then those 55 countries will impose a charge on Brits going to those 55 places. And one more thing: we think we’re right in stating that more Brits go to other places than people from other places come to Britain.

So, the net effect will be a transfer of money from Brits to foreign governments. As more of us will be paying to go to 55 countries than citizens of those 55 countries will be paying to come here.

Making foreign governments richer is a very odd indeed method of increasing revenues to pay for services in the UK.

As at the top there this isn’t party political partisanship. It is instead a call for all politicians to understand Chesterton’s Fence. If you see a fence somewhere you shouldn’t pull it down until you’ve worked out why someone built it in the first place. Only when you’ve understood the original reasons, then ensured that they no longer apply, should you proceed with destruction.

Why do we have visa waiver schemes with no charges? Because visa systems are always reciprocal. We charge them and they will charge us, not obviously to our benefit.

This isn’t about the Labour Party this is about a politician not bothering to think.

To reduce rape in India, legalise porn

In India, there has been uproar amongst the general public and from the media with respect to the alarming frequency of rape across the country. In the four decades leading up to 2012, reported rapeshave increased 900% (alarmingly, some activists claim that 90-99% go unreported). Additionally, in India it is currently legal to watch or possess pornographic material but the distribution, production or publication of such material is illegal.

In Anthony D’Amato’s (2006) ‘Porn Up, Rape Down’ (published in the Public Law and Legal Theory Research Paper Series at Northwestern Law School), the abstract reads:

The incidence of rape in the United States has declined 85% in the past 25 years while access to pornography has become freely available to teenagers and adults. The Nixon and Reagan Commissions tried to show that exposure to pornographic materials produced social violence. The reverse may be true: that pornography has reduced social violence.

Of course, it is often presumed by many Indian politicians that Indian society is largely conservative and would not tolerate legalisation of the distribution, production and publication of pornography. This is ironic when we consider that a world-famous book of Indian-origin is the Kama Sutra. Continuing to prioritise the appeasement of conservative facets of Indian society over the safety of women is counterproductive. India certainly has the maturity to see these activities legalised and, given that the recorded incidents of rape has raised serious concerns both within the country and around the world, it is necessary.

Whatever the reason may be for legalised and easily available pornography having a negative impact on rape (and there are more than several competing theories), the fact is that it does have a very strong, negative correlation and if we would like to see a decrease in rape on the subcontinent (both immediately and over time) and anywhere else where it remains illegal, for that matter, it would be best to legalise the distribution, production and publication of pornography immediately.

This would also improve the working conditions and salaries of those workers who are currently exploited in an industry that remains largely underground in the subcontinent, allow social workers to have greater contact with workers in a legal profession, bring in some much needed tax revenue and enable diversion of law enforcement resources from pornographic material to other, more critical issues (such as rape itself).