Well, doesn’t this just kill the Marmot Review

We did in fact read the Marmot Review, on the grounds that we suffer so that you don’t have to. And we were, we’re afraid to have to say it, deeply unimpressed with it. We have no doubt at all that a certain amount of the health inequality in the UK is a result of economic inequality. But we would also insist that a certain amount of the economic inequality in the UK is due to health inequality. And it’s that second that Marmot entirely disregarded. The Review insisted that if only we reduced economic inequality then health inequality would disappear: even as it is obvious that reducing the economic form of inequality won’t have any effect at all on that second form of it.

So, we now see this:

Thousands of people with cancer will feel “cold and lonely” this Christmas because they do not have enough money to celebrate or heat their homes, a charity has said.

Almost 170,000 people in the UK with cancer are unable to join in special family events such as Christmas due to a lack of cash, according to Macmillan Cancer Support.

Its survey of almost 1,000 people living with cancer found 9% had to miss out on visiting family and friends because they could not afford it.

Other research of more than 1,600 people who have been in touch with Macmillan found 28% were unable to adequately heat their home in winter due to money worries.

The charity has previously found 83% people with cancer are on average £570 a month worse off as a result of their diagnosis.

That health inequality leads to economic inequality is therefore proven. Marmot is wrong.

It’s trivially obvious that this was bad law in the first place

Laws that are passed in a wave of moral panic always, but always, turn out to be bad laws. And so it is, to absolutely no ones’ surprise, with the laws over pictures of people in the nuddy being sent over mobile telephones. Some seem to be recognising at least a part of it:

More than 1,000 under-18s have been investigated for sexting since 2012, with many ending up with a conviction under child pornography laws which can affect their education, work and travel opportunities in adulthood.
The group’s report said: “The drive for crime recording integrity is needlessly drawing other children and young people into the criminal justice system, impacting on their long-term welfare and future career opportunities.”
It called on the Home Office to re-write rules which set out how police record such incidents as crimes, as well as other “low-level” incidents such as fights between children who live in local authority care.

It is worse than this report states, of course it is. Not only are those under 18 who send such pictures possibly criminals, with life long records, those who receive them can be, and sometimes are, prosecuted for the possession of child pornography. A criminal record for such being something that we’d not really wish upon anyone.

To state how absurd the situation is, well, it’s absurd. Take a 16 year old girl, entirely legally in a sexual relationship. She may offer her enbonpoint to her lover to be gnawed, kneaded, caressed and kissed, yet if that lover is over 18 and possesses a picture of said breasts in their natural state they are guilty of possession of child pornography. Yes, there are mitigating factors available but the standard penalty is 5 years jail for this.

A 16 year old sends her girlfriend a semi naked selfie and it’s 5 years in the jug?

This could only have come about as the result of one of the more absurd moral panics.

What’s really at the heart of this is:

The practice of sending nude or explicit photographs over the internet has become “normal” among teenagers who rarely think through the consequences, the agency added.

Delving into our vague memories of Karl Marx, the level of technology determines social relationships. And this is simply one of those times that a change in technology has led to a change in such relationships. Teenagers are, as anyone with a reasonable memory will recall, remarkably interested in sex. The ubiquity of cameras has changed how they express that interest.

Shrug. It hardly seems like a good reason to criminalise the behaviour of an entire generation. The social mores of what is done and how will be sorted out by the society that is doing it and really, no one needs to be jailed for it. Perhaps that process won’t be entirely crisis or problem free, but jailing people over sexting isn’t going to help matters in the slightest.

Taxes: best when broad

Here at the ASI we like taxes to be as predictable, as flat, as broad-based and as non-distortionary as possible—not to mention as low as possible.

Until we’ve convinced everyone that we don’t really need the government for most of the things it does now, we’re going to need to raise revenue somehow. We want to do this in a way that reduces social welfare (and the economic activity that produces the goods to consume that produces the individual welfare that we sum to get social welfare) as little as possible.

Now we may sometimes need to use ‘Pigovian’ taxes—ones that discourage certain activities because they have negative outcomes on others—but most choices do not have substantial externalities. And in a society where property rights are clear and extensive, most substantial externalities will be priced in. For example, when roads are owned, their owners charge what we might call ‘congestion charges’: lots of problems arise only when some crucial good is un-owned and thus un-priced.

But generally we’re just picking up revenue somewhere to pursue some government activity we view as worth the costs. Any non-Pigovian tax is going to reduce economic activity and welfare, but some more than others. For example, taxing investment into capital disincentivises most the activities which bring us greater productivity and wealth in the future. By contrast, if we could magically know, and tax, each individual’s innate ability we wouldn’t distort any decisions at all—because no decisions could change their tax liability.

The upshot of all of this is that broad-based consumption taxes are the best method of raising tax we can actually do. A 20% (or higher) tax on any good at any time leaves us as free to decide between options as no taxes, even though we have less in total to go round. By contrast any tax on capital or savings biases us in favour of current consumption over future consumption (and an income tax is partly a tax on savings).

The IFS tells us that scrapping all UK VAT exemptions would have raised £26-28bn in 2010-11 (since which we have grown substantially in real and nominal terms). In their view we could compensate everyone fully and still have £3bn left over.

A new job market paper from Bibek Adhikari at Tulane University in New Orleans takes this result further. Because VATs are usually implemented country wide, Adhikari builds ‘synthetic controls’—essentially imaginary countries made up of weighted bits of other countries that didn’t implement VATs—to properly test the effect of large-scale consumption taxation.

He finds that switching to consumption taxation leads to more capital invested per worker and higher total factor productivity (a measure of how good we are at using inputs), thereby raising output per head. In his words:

Five years after the reform, TFP of the treated group is 9.9 percent higher compared to the synthetic group and at its highest, the TFP of the treated group is 11.6 percent higher than the synthetic group.

So the ASI was right then!

Ten initiatives to help young people: 7. Charter cities

London acts like a magnet, drawing enterprise, industry and talent to its orbit, and leaving other cities, especially in the North, with fewer jobs and opportunities.  The proposed “Northern Powerhouse” is designed to redress this situation to some extent.  Young people below the age of 25 find it particularly difficult outside London because of a shortage of starter jobs.  

A further initiative would be to allow selected Northern cities to opt for “Charter City” status, under which they would acquire a series of powers to determine locally things that are otherwise decided nationally.  This would include business rates and a raft of regulations.  Start-ups would be made easier, with specific measures to reduce the costs of starting businesses and the time it took to do so.  

The idea would be to attract investment and jobs, and to create new opportunities for local residents and those who chose to move there.  Young people would benefit from this along with the rest of the population, but there could be specific measures under the “Charter City” status targeted at the under 25s in particular.  They could be exempted from Council Tax.  They could be given assistance with accommodation.  Firms that took on people aged under 25 could be rewarded for doing so by lower rates and taxes.  Planning and zoning regulations could be eased for them.

The proposal for “Charter Cities” borrows something from the Enterprise Zones of a generation ago, but would in addition learn from some of their shortcomings and improve upon the original idea.  Much could be learned from a study of how successful cities abroad manage to make themselves attractive to new businesses and to draw in investment.  For the most part this consists not of handouts and subsidies, but of government, both local and national, removing some of the burdens it imposes on business, and lowering the barriers they must cross to establish themselves.

Germany’s “bonfire of restrictions” post World War II led to the German economic miracle, and Hong Kong’s famously liberal approach to businesses led to an explosion of wealth and opportunity.  The “Charter Cities” would aim to capture some of that approach and achieve some of that success.  Governments, local and national, would have to think long-term, postponing some of the revenues they could achieve in the present for the prospect of much greater revenues in the future, and the expansion of businesses generated by the measures would provide young people with the prospect of advancement.

Something to remember about COP21

Jeremy Warner is probably right about the outcome of COP21 here, that great gabfest to talk about climate change:

Ever clearer is that the debate on climate change is essentially over. Whether just a modern day delusion or not, virtually all political leaders now buy into the idea of man-made warming, and most of them seem willing to do something about it.

The question, as always, is what should be done. We have long taken the above view: the truth or not of climate change is not the important point. Politics is about what people believe, not the truth. Thus we’ve been advocating a carbon tax on the grounds that we know they’re going to do something so we might as well tell everyone to do what will cure the problem, if it exists, at least cost. Usefully, it’s also what every economist looking at the problem has also said, from Stern through Nordhaus to Tol.

However, there’s an implication of that:

Much fiercer carbon taxes are coming, driving huge change not just in energy consumption and production, but in all the myriad industries that depend on hydro-carbons, from plastics to automotive, metal bashing and even many service activities, which can be surprisingly energy intensive.

That’s actually not true, not here in the UK at least. Because we largely already have a carbon tax. It’s not distributed correctly, this is true (too much on petrol, not enough on farming) but overall we’re already coughing up about the “correct” amount as calculated by Stern (and more than Nordhaus or Tol would suggest for today). The combination of the fuel duty escalator, the EU’s cap and trade, the minimum carbon price and so on, while they’re not quite exactly the way it should all be done, do have roughly the right effect and size. According to Stern’s numbers the UK should be paying something like £30 billion a year in carbon tax given the roughly 500 million tonnes CO2 a year. We’re already paying that much when you tot everything up so we’re done.

Yes, it’s entirely true that some other people might have a lot of work to do to meet whatever is agreed in Paris. But as far as the UK is concerned we’re done, we’ve already put the correct and recommended policies into place. We’ve nothing else that we need to do except perhaps a little tinkering here and there. There’s most certainly no justification for significant rises in the general tax level, whatever COP21 agrees. Not that that’s what we’ll be told of course….