We free marketeers have a problem here

This is something of a facepalm moment:

When he vented his frustration about holiday prices shooting up during the school half-term break, Paul Cookson struck a chord with other parents. His rant to 250 Facebook friends quickly went viral as outraged parents shared his post about rip-off prices 143,000 times. Now the issue may even be debated in Parliament after more than 100,000 signed an online petition calling for the Government to curb prices.

Err, yes, access to the fixed supply of something may well be more expensive when more people want to gain access. It's that supply and demand thing in action. There are alternatives of course: it could be that the favoured children of party apparatchiki gain access. There have certainly been times and places where that was the allocation method. There could be queueing, there have been times and places where that has been used too. But of all the different methods that have been tried rationaing of something like this by price has ended up being the best one.

That isn't to say that rationing by price is always the best method: I'd not be happy with justice being so allocated for one. But the chance to sit in the chlorinated water someone else's baby has just passed through? Sure, ration by price.

But as we can see there appear to be at least 100,000 of our fellow citizens who don't agree. I am reminded of Bertoldt Brecht's point about the first East German elections: perhaps we should try to elect another people who do get this market economy idea.

It also reminds me of something I saw the first year after food price rationing ended in Russia. Eggs are painted for Easter, there as here, and one old grandmother couldn't understand why they became more expensive just before Easter. "Why are they more expensive just when everyone wants them?" If you don't get the basic answer to that one then the operations of a market economy are always going to mystify you. She had an excuse: she'd lived her entire life under a system that was not a market economy. Quite what the excuse of those 100,00 Brits is I'm not sure. They'd all understand instincitively why pay goes up on Christmas Day. Because that's the day that absolutely everyone wants to have off. That they can't make the leap to why holidays might be more expensive in holiday time mystifies me.

Yes, really, Women's Lib caused inequality

Now here's a thing: the liberation of half the country from their economic and social shackles I regard as an unalloyed good thing. That this liberation of women largely came from technological causes, the "washing machine" or domestic household technology as Ha Joon Chang calls it, plus the decline in the economic importance of male musculature, doesn't matter at all. That it happened was great.

However, as recent research is showing, it has also led to an increase in the inequality of household incomes.

The argument is very simple indeed. We have moved from a society in which women tended not to work into one in which they tend to do so. And obviously, women tend to do the sort of work they are educated to achieve. Add in that people tend to meet their partners through university or work these days and it's quite clear that professionals will tend to marry professionals, blue collar blue collar and so on. We thus end up with a world in which there is a strata of society enjoying two professional incomes per household and others enjoying two white collar incomes, two two blue collar and so on. Although it does rather break down at that last: stay at home housewives are more likely to be in the working classes.

Whatever the earlier level of household income inequality we had before it's obviously going to be larger now. That a polemicist for the trade union movement is married to a GP, or that the Harman/Dromey household enjoys two, not just the one, MP salaries and allowances, makes the gap between those professional classes and the average working joe greater.

Short of the State telling people who they may shack up with there's no real way out of this either.

But what's really interesting is that that linked paper is claiming that all of the rise in US household income inequality can be put down to this one factor. And if that's so then I cannot for the life of me see that that rise in inequality is a problem. People are now much freer in their love and working lives than they used to be. That's good, in fact that's great. The side effects be damned.

There's nothing neoliberal about work for the dole

OK, so this story comes from Australia where they might be far enough away not to be quite up to speed with things. But the idea that people should work for the dole is not in fact some appalling apparition leaping from the fevered imaginations of neoloberals. It's not, in fact, even a liberal idea. It's an entirely social democratic one: you know, soft left sorta thing?

A favourite policy of talkback callers everywhere, work for the dole is also an idolised measure for the right side of politics where old-fashioned conservative selfishness dovetails nicely with the extremist economic demands of economic neoliberalism. The idea is that to receive the sub-poverty-level subsistence Centrelink payment of $250 week, dole recipients will be mandated into forced labour or deprived of subsistence completely. Currently mooted are plans for the unemployed to be mandated to pick up rubbish in the not-for-profit sector or work in aged care homes as maintenance workers.

Ah, no. Here is the impeccably social democratic and soft left M'Lord Layard on the subject from 15 years ago or so:

This long-term unemployment is a huge economic waste. For people who have been out of work for a long time become very unattractive to employers and easily get excluded from the world of work. So it often happens that employers feel a shortage of labour even when there are many people long-term unemployed, with the result that inflation rises even in the presence of mass unemployment. Thus a major objective must be to reduce or eliminate the long-term unemployment caused by welfare dependency. There are two possible approaches – “stick” and “carrot”. The evidence suggests that much the best approach is a combination of the two. This combined approach is now being used increasingly in Britain, Denmark, the Netherlands and of course in the U.S. for single mothers on welfare. In consequence in these countries there have been dramatic falls in unemployment consistent with a given level of vacancies – which in most other countries continues to rise.

The argument is extremely simple. People who are long term unemployed drop out of the labour force entirely. This is both a waste of their lives and also of the things that they could be producing for the rest of us. We therefore want policies which keep the long term unemployed in that labour force: even up to and including make work programs while they collect their unemployment pay. For this does indeed keep them connected with the world of work and aids in preventing that dual waste of their lives and out money.

This is absolutely nothing at all to do with being right wing, conservative, neoliberal or even liberal. It's an entirely social democratic analysis of the problem and an entirely social democratic solution.

It may also be a good one, might also be a bad one but that's an entirely different matter. The blame or the plaudits, whichever way around it should be, should indeed go to those who proposed it. Similarly, if it's a good idea than praise its introduction whoever does it and if a bad one condemn it.

Peronally I'm convinced by the argument and the evidence and in the absence of my preferred solution (a return of capitalism red in tooth and claw that would raise the growth level and thus reduce unemployment) support the idea that work for welfare is a good idea. Even if it did come from my old economics professor....

Technology, Privacy and Innovation in 2014

Prediction lists for the coming year are always revealing, though perhaps more of the current public mood than the future. A write-up of the tech trends for 2014 by Fast Company's design blog is hardly controversial, but what is interesting is how the areas they’ve chosen highlight the existence of two wider and seemingly divergent technological trends. This apparent conflict in the way technology is heading is far from problematic. On the contrary, it shows our success in adapting and experimenting with new ideas and in response to shifts in the social and political context, without the need for any central guidance.

One thing clear from Fast Company's list is that 2014 will bring a continued increase in the volume and depth of the personal data we create. Things like Google Glass, the ‘quantified self’, hyperpersonalised online experiences and the interconnectivity of the Internet of Things all create new reasons and mechanisms for data capture. This in turn increases the value of our data to ourselves, the companies with access to it and, in some situations, the state.

However, the article also predicts that 2014 will see increasing concerns over cyber-privacy and a movement towards greater digital anonymity. Users will increasingly chose to control their own data and how this is profited from, whilst we will begin to discover the joy of ‘disconnecting’ from the digital world and see the creation of intentional blackspots.

The fact that we seem to be embracing deeper technological integration yet simultaneously finding ways to mitigate and avoid its consequences is certainly interesting. Does this show that we’ve raced forward too fast and are trying to claw back a space we’re realising we’ve lost? It’s perhaps possible that this is the case, but far from giving us cause for concern the two-track path we’re seeing shows the ability of consumers and the tech sector to adapt over time, and in turn gives some hints on the optimal tech policy.

Reservations about an increasingly digitized and tech-heavy world are common, be it concerns over ‘hyper-stimulation’, the aggressive monetization of our digital footprint or wide-scale data collection and its abuse by unscrupulous firms and governments. Concerns often partner with conservatism; a desire to slow down the pace of technological rollout and impose prior restrictions on how things may be used. More often then not, government regulations and restrictions are cited as the way to hold a check on technology and keep us safe.

For example, Google's announcement to purchase the home thermostat company Nest was met with calls for a "much-needed conversation about data privacy and security for the internet of things". However, despite the fact this conversation hasn’t actually taken place yet, the same article expresses dismay and concern that the US government has been reluctant to legislate in this fledgling area.

Clearly, security breaches and the abuse of sensitive information are unwanted, and the more data collected the larger a slip-up could be. However, as Adam Thierer points out “conjectural fears and hypothetical harms should not drive regulation”.

Even when a problem can be identified, it’s unlikely that a committee of concerned yet under-informed policy makers are best placed to deal with it. A case in point is the EU’s Privacy Directive, the progress of which has been continually stalled by conflicting interests and general confusion. Moreover the pace of government action often runs way behind business and societal developments, and policies forged to address a pressing issue today may be redundant in five years’ time.

Worse still, restrictions dampen innovation and risk choking off the next big breakthrough – clearly advances are less likely to come about if we can’t use our resources creatively. This is particularly true in fast-moving and dynamic technology sectors. It’s hard to imagine the success of the internet if companies and experiments had been subject to governmental approval and top-down control.

Ultimately, however, we should be reluctant to adopt state-imposed ‘solutions’ to technological problems is because the market is actually incredibly good at dealing with these issues itself.

This is exactly what the two sides to 2014’s tech trends show. 2013 gave us reasons to be more wary about what we give away about ourselves & put online – and developers have taken note. If we feel at the mercy of data-sucking giants we can begin to avoid them. As the public tires of Facebook, alternative social networks centred upon privacy and control continue to emerge. Hate search engines knowing what you’re looking for? Try out DuckDuckGo . Want greater control over your data? Look out for indiePhone and OS. This new wave of open-source and privacy-conscious technologies is marked by an increasingly sleek user experience as it moves out of the realm of geeks and into the mainstream.

Of course, not everybody will care about these things, and neither should they have to. The beauty of a world where experimentation is encouraged is that people can pick and choose what things (anonymity, relevant ads, seamlessly connected devices and so forth) are important to them, and make their tech usage decisions accordingly. In contrast, government restrictions impose a cost on the whole of society and assume that we hold the same preferences and level of risk aversion. When faced with new dimensions to questions like ‘How should companies use my data?’ and ‘Is it wise to let technology to do x?’, we’re more likely to find answers we’re happy with through personal experimentation and adaption than taking the word of interest groups and politicians.

We might get things wrong along the way and maybe even double-back on ourselves, but its clear that so long as we continue to innovate, we’re likely to solve our own problems and satisfy a range of preferences.

Technology, Privacy and Innovation in 2014

Prediction lists for the coming year are always revealing, though perhaps more of the current public mood than the future. A write-up of the tech trends for 2014 by Fast Company's design blog is hardly controversial, but what is interesting is how the areas they’ve chosen highlight the existence of two wider and seemingly divergent technological trends. This apparent conflict in the way technology is heading is far from problematic. On the contrary, it shows our success in adapting and experimenting with new ideas and in response to shifts in the social and political context, without the need for any central guidance.

One thing clear from Fast Company's list is that 2014 will bring a continued increase in the volume and depth of the personal data we create. Things like Google Glass, the ‘quantified self’, hyperpersonalised online experiences and the interconnectivity of theInternet of Things all create new reasons and mechanisms for data capture. This in turn increases the value of our data to ourselves, the companies with access to it and, in some situations, the state.

However, the article also predicts that 2014 will see increasing concerns over cyber-privacy and a movement towards greater digital anonymity. Users will increasingly chose to control their own data and how this is profited from, whilst we will begin to discover the joy of ‘disconnecting’ from the digital world and see the creation of intentional blackspots.

The fact that we seem to be embracing deeper technological integration yet simultaneously finding ways to mitigate and avoid its consequences is certainly interesting. Does this show that we’ve raced forward too fast and are trying to claw back a space we’re realising we’ve lost? It’s perhaps possible that this is the case, but far from giving us cause for concern the two-track path we’re seeing shows the ability of consumers and the tech sector to adapt over time, and in turn gives some hints on the optimal tech policy.

Continue Reading...

An alternative ‘Agenda for Hope’

Owen Jones has written a nine-point ‘Agenda for Hope’ that he argues would create a fairer society. Well, maybe. I’m not convinced by many of them. Then again, it would be quite surprising if I was.

But it got me thinking about what my nine-point agenda would be — not quite my 'perfect world' policies, but some fairly bold steps that I could just about imagine happening in the next couple of decades. Unlike Owen’s policies, few of these are likely to win much public support. On the other hand, most of the political elite would think these are just as wacky as Owen's too.

Nine policies to make people richer and freer (and hopefully happier):

1) The removal of political barriers to who can work and reside in the UK. Removing all barriers to trade would increase global GDP by between 0.3% and 4.1%. Completely removing barriers to migration, though, could increase global GDP by between 67% and 147.3%. Those GDP benefits would mostly accrue to the poorest people in the world. We can’t remove these barriers everywhere but we can show the rest of the world how it’s done. Any step towards this would be good – I suggest we start by dropping the net migration cap and allowing any accredited educational institution to award an unlimited number of student visas.

2) A strict rule for the Bank of England to target nominal GDP instead of inflation, replacing the discretion of the Monetary Policy Committee. Even more harmful than the primary bust in recessions is what Hayek called the ‘secondary deflation’ that comes about as people, fearing a drop in their future nominal earnings, hold on to more of their money. That reduces the total level of nominal spending in the economy which, since prices and wages are sticky in the short run, leads to unemployment and a fall in economic output. NGDP targeting prevents those ‘secondary deflations’ and would make economic busts much less common and harmful. In the long run, we should scrap the central bank altogether and replace it with competition in currencies (see point 9, below).

3) Significant planning reform that abolished the Town and Country Planning Act (which includes the legislation ‘protecting’ the Green Belt from most development) and decentralised planning decisions to individuals through tradable development rights (TDRs). This would give locals an incentive to allow new developments because they would be compensated by the developers directly, allowing for a reasonably efficient price system to emerge and making new development much, much easier. The extra economic activity from the new home building alone would probably add a couple of points to GDP growth.

4) Legalisation of most recreational drugs and the medicalisation of the most harmful ones. I think Transform’s outline is pretty good: let cannabis be sold like alcohol and tobacco to adults by licensed commercial retailers; MDMA, cocaine and amphetamines sold by pharmacies in limited quantities; and extremely dangerous drugs like heroin sold with prescriptions for use in supervised consumption areas. The sooner this happens, the sooner producers will be answerable to the law and deaths from ‘bad batches’ of drugs like ecstasy will be a thing of the past. Better yet, this would bring an end to drug wars like Mexico's, which has killed around 100,000 people in the past ten years.

5) Reform of the welfare system along the lines of a Negative Income Tax or Basic Income Guarantee. As it is, the welfare system disincentivises work and creates dependency without doing much for the working poor. A Negative Income Tax would only look at people’s incomes (not whether they were in work or not in work), reducing perverse incentives and topping up the wages of the poorest earners. This would strengthen the bargaining position of low-skilled workers and would remove much of the risks to workers associated with employment deregulation. Of course, the first thing we should do is raise the personal allowance and National Insurance threshold to the minimum wage rate to give poor workers a de facto 'Living Wage'.

6) A Singaporean-style healthcare system to replace the NHS. In Singapore, people have both a health savings account and optional catastrophic health insurance. They pay a portion of their earnings into the savings account (poor people receive money from the state for this), which pays for day-to-day trips to the doctor, prescriptions, and so on. The government co-pays for many expenses but the personal cost disincentivises frivolous visits to the doctor. For very expensive treatments, optional catastrophic health insurance kicks in. This is far from being a pure free market system but it is miles better (cheaper and with better health outcomes) than the NHS. (By the way, if you really like the NHS we could still call this an ‘NHS’ and still get the superior system.)

7) A school voucher system and significant reform of the state education and free schools sectors. This would include the abolition of catchement areas and proximity-based admission, simplification of the free schools application process, and expansion of the free schools programme to allow profit making firms to operate free schools. These reforms, outlined in more detail in two ASI reports, would increase the number of places available to children and increase competition among schools to drive up standards.

8) Intellectual property reform. As both Alex Tabarrok and Matt Ridley have pointed out, our IP (patent and copyright) law is too restrictive and seems to be stifling new innovation. Firms use patents as barriers to entry, suing new rivals whose products are too similar to their own. In industries where development costs are high but imitation costs are low, like pharmaceuticals, patents may be necessary to incentivise innovation, but in industries like software development where development can be cheaper than imitation, patents can be a terrible drag on progress. Tabarrok recommends that we try to tailor patent length in accordance with these differences; as a sceptic about our ability to know, well, anything, I’d prefer to leave it to private contracts and common law courts to discover.

9) Last but not least, the removal of the thicket of financial regulation and the promise of bailouts for insolvent banks. Known as ‘free banking’, this system of laissez-faire finance has an extremely strong record of stability – though bank panics still occurred in free banking systems, they were much less severe and rarely systemic. Only once the government started to intervene in the financial system to provide complete stability did things really begin to go wrong: deposit insurance, branch-banking restrictions, and other prudent-seeming regulations led to extremely bad unforeseen consequences. The financial crisis of 2008 probably owes more to asset requirements like the Basel accords, which heavily incentivised banks to hold ‘safe’ mortgage debt over ‘risky’ business debt, than anything else. Incidentally, the idea that having a large number of local banks is somehow better than having a few large banks is totally wrong: during the Great Depression, 9,000 of America's small, local banks failed; at the same time not one of Canada’s large banks failed. The small banks were more vulnerable because, unlike the big banks, they were undiversified.

Now, if only there was a think tank to try and make these dreams a reality.

Bill Easterly on Bill Gates and aid and development

Bill and Melinda Gates have released their annual letter on what's going on with their Foundation, global poverty and aid. And they quite rightly point out that things are indeed getting better.

However, this is not the same thing as stating that it is aid that is making things better. As Bill Easterly points out:

The obsession with international aid is a rich-world vanity that exaggerates the importance of western elites. It is comforting to imagine that benevolent leaders advised by wise experts could make the poor world rich. But this is a condescending fantasy. The progress that Mr Gates celebrates is the work of entrepreneurs, inventors, traders, investors, activists – not to mention ordinary people of commitment and ingenuity striving for a better life. Davos Man may not be ready to acknowledge that he does not hold the fate of humanity in his gilded hands. But that need not stop the rest of us.

There are undoubted successes stemming from aid budgets: vaccination programs or the spread of oral rehydration therapy for example. These have certainly been funded by aid: but we should also note that our own societies managed very much the same things without aid from abroad to pay for them. So while aid may indeed have paid for them that's not the same as stating that aid is necessary for them to have happened.

But Easterly's larger point is that aid flows are of such tiny amounts in comparison with the global economy that they cannot in fact explain that marvellous reduction in poverty. Over the decades there's been very little aid to places such as China, Taiwan, S. Korea, the places where the battle against poverty is being so conclusively won for example. What has actually worked is that these places have become part of the global economy rather than languishing in purist localism.

Or, as we like to say here at the ASI, I contribute to making poor people richer by buying things made by poor people in poor countries.

Aid's all very well but trade is the name of the game.

Small firms and the EU: Curate's Exports

It's good that Business for Britain is looking at the cost of regulation to small business, says Tim Ambler, but by focusing on devolution they push in precisely the wrong direction—more unified markets are lower regulation markets.

Only those firms who export to other parts of the EU should have to comply with EU regulations or so says Business for Britain (Daily Mail, 18th January).  Business for Britain claims that as 95% of UK firms do not trade with the rest of the EU, £7.5bn. could be saved for the UK. The knee-jerks in response were what could be expected from those pro and sceptical of the EU.  The proposal has had little considered analysis.

Business for Britain has re-ignited the debate about exempting small firms from most regulation.  Brussels has accepted this in principle but has done little or nothing about it.  Briefly the arguments are: • As a percent of turnover, the cost of regulation is far higher for small than large firms.  This is unfair and distorts the market. • Regulation is a barrier to entry and therefore reduces competition. Start-ups in a market are typically small and require a low regulatory threshold to facilitate entry. • Small companies are more regulated, in effect, by market competition than their oligopolist big brothers and therefore require less legal regulation.

The Business for Britain proposal is therefore welcome insofar as it brings pressure for the relief on small businesses.

On the other hand, their proposal is flawed in the following respects;

• Having a single market across the EU, albeit with standard reliefs for small firms, is such a fundamental principle of the EU that there is no chance Brussels, or the EU Court of Justice, would tolerate these concessions for domestic firms.  It would give domestic firms competitive advantage over importers from other EU member states.

• Business for Britain expect that other member states would reciprocate and that Brussels should therefore accept that the arrangements were even-handed.  However allowing all member states to make up their own rules for domestic businesses would put UK exporters, or those doing business in other member states, at a competitive disadvantage.  Since the rest of the EU is a great deal bigger than the UK, the net effect would be negative for the UK.

• The UK economy desperately needs more exports and overseas trade, notably in the EU.  Having to step up, as Business for Britain suggest, from no EU regulations to implementing them all the minute one sends a box to Calais would be a major disincentive to overseas trade. One of the EU’s great successes has been to make EU exports easy.  It would be a mistake to reverse that.

• A single market is defined by having a single set of regulations.  The EU is slowly, too slowly, moving in that direction.  Yet the last 20 years have seen far more UK business regulations than we have endured from Brussels.  Whitehall is happy to fan the flames towards Brussels but the fact of the matter is that all UK business regulation is “gold plate”. I am not referring to the relatively trivial matter of adding to EU Directives but to the much bigger matter of having a huge number of UK regulations in addition to the EU ones.

• In a single market, if the UK needs a regulation, then so does the rest of the EU.  If the rest of the EU does not require a regulation, then nor does the UK.  Yes, we should jettison much EU regulation but that needs negotiation.  Dumping UK business regulation does not.  A major reason why Brussels rejects pleas for deregulation is that Whitehall sets a bad example and then blames Brussels.  We need to put our own house in order first.

• It has been suggested that other large countries, such as the USA and China, are single markets which nonetheless have separate regulations in separate states.  Of course there are shades of grey in all this but the USA and China, and other large markets, are not single markets.  In the USA, for example, it is illegal to trade alcoholic products across state borders.  Each state is its own market.  The low regulation single market may be an impossible ideal but it is a clear goal towards which we should push.

• The UK is unpopular within the EU family not least because it is always demanding concessions for itself without regard for the community as a whole.  The Foreign Office and government ministers play to UK media headlines with calls for red lines and such like.  This may get a good UK press in the short term but it reduces Britain’s standing in the eyes of others.  It is poor EU negotiation. The French and the Germans get their own way, to a great extent, by framing their arguments as being good for the EU.  The more the issue is really for their sole advantage, the more they stress the EU perspective.  The only significant UK negotiating successes have been Thatcher’s Rebate and Major’s opt-out of the Social Chapter.  Unsurprisingly both were resented and Blair handed most of them back without any offsetting UK benefits. In presenting their case as an advantage for the UK, Business for Britain compromises Britain’s overall negotiating position.

• The Common Market is what the British public signed up for.  Prime Ministers Heath and Wilson knew perfectly well that the fine print included social and political integration but most of us only cottoned on many years later. We should now do all we can to promote the benefits of the Common Market for the EU as a whole to our fellow member states.  We are not alone in our concerns about political and social standardisation but we should accentuate the good rather than attack the dubious.

The Business for Britain are right to put the spotlight on regulatory relief for small businesses and it would be good to see that issue taken forward.

Equality: as cheap as 50p?

Peter Oborne argues that Ed Balls' pledge to raise the 45p top tax rate back up to 50p is a good idea. While the extremely high marginal rates (top main rate 83%, plus a 15% surcharge for "unearned income") of the 1960s and '70s might have been driven by "socialist envy", George Osborne's dropping the rate from 50p to 45p in was "profoundly shaming and offensive", Oborne contends. This is because, echoing Stanley Baldwin and his brand of Toryism, the conservatives should represent the whole country, not the rich or any other factional interest.

Apparently the Coalition has "devoted a great deal of effort to lowering the living standards of the poor", and this move to "make the rich richer" is inappropriate when the poor are getting poorer. I contend this by arguing that inequality is down to 90s levels under chancellor Osborne, while the worst-off in society are the only group to actually see their living standards improve the since the recession hit. And the (ugly, unpleasant, and regrettable) attitudes that have emerged towards benefits claimants are probably driving government rhetoric in that area, rather than vice versa.

In general, it annoys me when a columnist writes something apparently trading on what everyone just knows. Sometimes the common view is incorrect. Funnily enough, politics is the area where people err most profoundly and with the most regularity. And I would argue that Oborne is trading on falsehoods in his piece; would it still be a coherent argument if it started with the factual premise that inequality in the UK fell back below its 1997-8 low in 2011-12, 0.34 measured by the GINI coefficient? That the top 10% of earners endured the biggest blow to their incomes since the onset of the recession? And that the bottom 10% by income were the only one to see a rise in living standards taking inflation into account? I don't think so.

The IFS reports I link above predict that by 2015-16 inequality will rise back to roughly its pre-recession level, so perhaps Oborne could refocus his attack on the future inequality Osborne possibly has a hand in. But in all likelihood there is probably little the government can do about inequality over the long-term, caused as it is by very fundamental trends and robust as it is to institutions even such as the USSR's. Most of the extra inequality since the 60s and 70s has come from couples engaging in much more assortative mating. And very long-term trends are mainly dominated by heritability of social class—those with Norman surnames are 28% more likely than a random sample of similar others to get an Oxford place.

Just how far we've come in two decades

OK, so this is largely a result of Moore's Law allied with some clever technologists but still, it's interesting to see quite how far it is that we've come.

The back page of the front section on Saturday, February 16, 1991 was 4/5ths covered with a Radio Shack ad. There are 15 electronic gimzo type items on this page, being sold from America’s Technology Store. 13 of the 15 you now always have in your pocket.

...

You’d have spent $3054.82 in 1991 to buy all the stuff in this ad that you can now do with your phone. That amount is roughly equivalent to about $5100 in 2012 dollars.

I've bought myself an off contract smartphone recently for around £100, or $150. Which shows how far we've come over these couple of decades really.

Which in and of itself is just an interesting observation (as is the one that the run of the mill smartphone these days packs more pure computing power than a Cray 2 from the early 1990s). However, this sort of technological change is something that our economic statistics deal very badly with. For several unfortunate reasons.

The first being that we do indeed try to adjust for the improving quality of things, through what are known as "hedonic" adjustments. But there's no one who really thinks that we've got this right as yet. Secondly, the advances in such things as our phones allow us to do things that were simply impossible before. And there's no real way os squeezing those into the GDP statistics. For the third reason: and awful lot of what we can do with these new technologies is actually free at the point of use. So therefore, not being charged for, it dsoesn't turn up in the GDP figures. And fourthly, those things that we used to be able to do but now can do them more conveniently have actually fallen in price. And given that it is the market prices that GDP tracks the contribution here is actually negative.

And this is indeed a problem with our economic statistics. I think a case could be made (I'd argue it, but not want to have to prove it) that the coming of smartphones has been recorded in GDP as a reduction in GDP. Which, given that we can now all do things we couldn't before, do things we could more cheaply, and do other things simply better seems like a remarkable indictment of the basic statistic.

But then we all know that GDP isn't the be all and end all of everything: it's maximising utility that is. GDP is just an indication that there might be more utils out there to enjoy: but not, sadly, a terribly accurate one.